Once the redundancy shock wears off, you need to act
Most of the 575 workers at the TalkTalk call centre in Waterford who were notified that their jobs will disappear in a brutally short 30 days are more than likely in debt. Such a young workforce will be heavily weighed down with mortgages, credit cards, personal and credit union loans etc that will be falling due as usual next month, along with utility bills and crèche fees.
They are not alone of course. Unemployment continues to rise with 14.4% of the population out of work as of the end of August, or just under 450,000 people when seasonally adjusted.
When so many workers become unemployed on the same day, a surge of claims is inevitable at the local social welfare office.
In this high profile however, the Minister for Social Protection has announced that the likes of MABS, the Community Welfare Service and FÁS will come together as soon as possible to make a presentation to staff and conduct Q&A sessions.
This will hopefully expedite the process for benefits and redundancy payments.
However, the experience of many other workers is not good: delays of six to twelve weeks before any payments are made are not uncommon and sometimes the delay can be much longer (where only statutory redundancy payments are made).
Anticipating this will help and anyone who is made redundant can do a few things to move the process forward, such as downloading the Jobseekers Benefit application from the Department's website, www.welfare.ie and by gathering all the appropriate documents (P45, P60, proof of ID and address, proof of dependent spouse/children, etc.) in advance of your first attendance at the social welfare office.
Dealing with creditors
With a long list of bills to pay, the mortgage in particular, redundant workers need to act proactively once the initial shock of losing their job wears off.
If only to lower your own and your family's stress levels, you should contact your lender as soon as possible to inform them that your job is gone. You must keep a written log of all communications and ideally, put all inquiries for meetings or debt restructuring in writing.
The banks are coping with varying degrees of efficiency to the huge number of requests for debt restructuring and forbearance under the revised (and other) codes of conduct on arrears and debt.
You are joining a queue and you must keep track of the efforts you make to cope with your reduced resources to pay your debts and bills.
According to Michael Dowling, the CEO of the Irish Mortgage Advisors Association which is about to launch a major study of the mortgage crisis, anyone made unemployed should be seeking "at the minimum of a three month repayment moratorium of their mortgage" and other loans. Most banks, he said, will agree.
This, he says, "gives you some breathing space to process all your claims, to review your spending, prepare new budgets" which can then be presented at the end of this period when a new, viable debt repayment schedule can be drawn up until you find a new job. Don't accept any debt deals, like handing back a tracker mortgage unless the bank offers a huge capital write-down, says Dowling.
The spending review is a key part of this process and you need to now only adjust your essential spending - shop around for the best utility and insurance contracts - do not instantly cancel life or health insurance, do get them reviewed by a good broker or your life company.
However, you will need to cut back on discretionary spending. A new budget needs to include modest treats for your children, money for Christmas and even an annual holiday, the emphasis being on the word 'modest'.
For workers who receive redundancy payments, they should resist any suggestion to use this money to entirely clear credit card or other unsecured debts. "This is money you are going to need to live on and help pay all your bills," says Dowling.
Clearly, the high-interest bearing credit card balance needs to be brought down but not at the expense of having sufficient money to pay for groceries, the heating and light bill etc.
The new unemployed also need to think outside the box: If, for example, you are determined to hold onto your home, despite losing your income (it may be in serious negative equity with no chance of a sale) then you could, for example, consider the Rent a Room scheme: you can earn €10,000 a year tax free renting rooms with no adverse impact on your welfare benefits, mortgage interest relief or CGT exemption if it is sold.
Workers who have a chance to emigrate will also need to clear some bills and either sell their Irish homes or rent them. Where negative equity is not a problem, the banks may be willing to negotiate on a small sale shortfall (especially if a tracker loan is involved) but you may have some tax issues to deal with and you will certainly have to adjust insurance policies and utility contracts.
There hasn't been a tougher time to lose your job, but there's plenty you can do to ease the stress and cope with the financial fallout.
Just don't put it off for too long - the sooner you sort out the paperwork and your creditor's expectations, the sooner you can move forward.
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