Redundancy Protection: What Employees Need To Know

If you're an employee then you should think about redundancy protection. It used to be that you had a job for life. There are families where entire generations worked for the same company, and the company seemed virtually indestructible. Not any more. As an employee you just don't know when the company's staffing priorities might change or when business might start to decline. It makes sense for employees to prepare for this by getting some insurance.

Redundancy protection is a kind of insurance that helps employees to have the funds they need to pay their mortgage and bills if they are made redundant. You might be familiar with similar products such as payment protection insurance. This is a type of insurance that means that you can repay a certain debt if you are no longer earning. Many payment protection insurance policies are sold when you take out store cards or enter hire purchase agreements, though you can also buy standalone policies. In fact, recent guidance by the Financial Services Authority suggests that this may be a better option.

Protecting Your Income

There are other insurance policies that have similar functions, and their names give a clue to the insurers' emphasis. There's some protection in accident sickness and unemployment insurance, which may also just be unemployment insurance. Income protection insurance is another type of insurance that covers the same sorts of circumstances. As an employee, it makes sense to ensure that you can meet your financial commitments even if you no longer have a job. You can also get salary protection insurance which will protect part of your income over a period. Most policies only pay out for between 12 and 24 months.

This is especially important for employees who have been with the company for less than two years. Those who have been employed for more than two years, even if this is on a fixed term contract, have the right to get redundancy pay. The amount each employee will receive will depend on how old they are and how long they have been with the company. There's a statutory maximum of 12 weeks' pay for employees who have been with the company for 12 years. Redundancy payments are tax free, which could mean a tidy little sum in your pocket. For those who don't qualify, it's essential to give some thought to the future and investigate redundancy protection schemes.

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