Should I take the redundancy package?

[nest egg]

A significant organisational change at the firm I work for may mean redundancy is on the cards later this year. Due to my tenure, there could be a large ex-gratia payout (250-300k before tax). However, I've heard I may be one of a select few who management "fight" to retain.

I'm giving strong consideration to taking the package regardless, and indicating my preference/intention sooner rather than later, before anyone starts a process to retain my position.

This is new territory for me, so does anyone think I'm mad to give up the certainty of my job for a payout like this? Or, to indicate my desire to do so early on?

Salary Me: 170-175k (incl bonus, RSUs etc) + another 20k in company pension contributions & health insurance premiums
Salary Mrs: 67.5k (incl bonus)
Ages: 40 (both)
Kids: 2 (creche and primary school ages)
Mortgage: 350k / 1m home (307k by year-end if over-payments continue as planned)
Pension pot: 450k
Savings/Investments: 75k
No other debt / investments

 

[PGF2016]

If management want to keep you then I'd guess you'd have no concerns finding a similar position elsewhere. Is that correct? Can you get a similar position without any reduction in career prospects and without any reduction in quality of life (e.g. if new job required increased commute etc)? What is the organization going to be like after the redundancies? Will you be staying on a sinking ship?

For a lot of people it would be a life changing amount of money but considering your position as you've outlined it I don't think it is. More of a cherry on top.

I was in a similar position, albeit less money, and took the money. Haven't looked back. Moved on to similar roles and use the payment to make things easier (reduced mortgage etc).

 

[nest egg]

Good questions.

If management want to keep you then I'd guess you'd have no concerns finding a similar position elsewhere. Is that correct? Can you get a similar position without any reduction in career prospects and without any reduction in quality of life (e.g. if new job required increased commute etc)?

One part of the appeal of my current position is its proximity to home, albeit these days that's only of benefit 1-2 days a week. I suspect I may have to choose between a position with a similar salary or a position with a similar commute.

Also I can't ignore the fact that while I've applied for, and successfully gained promotion over the years internally, it's a been a while since I've been on the open market. I should find a way to test my marketability beforehand. The most obvious would be to start applying for other jobs, doing interviews and assessing the response.

What is the organization going to be like after the redundancies? Will you be staying on a sinking ship?

This is my primary concern. I may find myself unable to do my job due to the significant cutbacks being made. On the flip side, periods like these usually offer opportunities for advancement which would not otherwise be available. Downside risk though is greater than the upside.

For a lot of people it would be a life changing amount of money but considering your position as you've outlined it I don't think it is. More of a cherry on top.

Up until now, I was on a certain path and hadn't given serious thought to alternatives. This sum could for instance clear a lot of our mortgage, which may give me options I wouldn't have considered before. Who knows, it may well be life-changing.

I was in a similar position, albeit less money, and took the money. Haven't looked back. Moved on to similar roles and use the payment to make things easier (reduced mortgage etc).

Great to hear someone who's been through it, and that it worked out well.
Would you have any advice for someone about to go through the process?

 

[sharkattack]

indicating my preference/intention sooner rather than later, before anyone starts a process to retain my position.

You got to be careful with this approach. If you give the impression that you want to leave, the company could decide why pay him off when he intends to leave anyway and will probably go of his own accord if he doesn't get the redundancy package.

 

[NoRegretsCoyote]

Up until now, I was on a certain path and hadn't given serious thought to alternatives. This sum could for instance clear a lot of our mortgage, which may give me options I wouldn't have considered before. Who knows, it may well be life-changing.

If you take the package I would only use maximum half to pay down the mortgage. The opportunity cost of holding the rest in cash is not all that high for the time it takes you to get re-settled in your career. This may involve re-training and you could burn through more cash than you think. You'll at least be entitled to nine months jobseekers benefit if you are made redundant but this is taxable.

Otherwise my advice is "go for it". A change of employer or career is much, much easier to do at 40 than 50. Employers are ageist to some extent and there is a limit to when they think you can comfortably fit in.

 

[PGF2016]

Would you have any advice for someone about to go through the process?

If you've been with the same company for a long time (this must be the case given the size of the package) then my advice would be to take the money. Offers like this don't come around very often. If you do decide to take the money then start preparing your CV immediately. Get professional assistance. Get your linkedin profile updated and connect with as many recruiters as possible. With the size of the package you shouldn't be in a panic to find a new job. Take your time and do as many interviews as possible. The process will probably take months.

Of course while doing this you should not drop the ball at your existing job. Don't exit on bad terms.

Generic enough advice but mostly I'd say go for it.

 

[Peanuts20]

Why is the package being offered and is there any realistic chance of the package terms changing a few years down the road?

What I would do is out a CV together and get it out there with a couple of agencies and see what their reaction is and whether or not you can easily pick up a new role at an acceptable salary.

 

[Blackrock1]

take the money, at your age, unless its a very niche role, id imagine you wont have an issue finding alternative employment at a similar level.

 

[_OkGo_]

This is new territory for me, so does anyone think I'm mad to give up the certainty of my job for a payout like this?

Not at all, in fact I think you should take the financial aspect out of your decision making. You are very comfortable financially for your age with a relatively small mortgage vs your income and a lot of equity in your PPR plus a very healthy pension pot at 40.

Your decision to stay should be based on your confidence in the future of the company or your role.

I may find myself unable to do my job due to the significant cutbacks being made

For example, if it is purely a cost cutting restructure , you could end up doing more work with less resources, getting more frustrated and ultimately ending up in the same position (redundancy) in a couple of years. Or worse, you might leave out of frustration at the lack of resources which would mean missing out on a big redundancy.

However, if the restructure has a clear vision/purpose (e.g. targeting a new technology or market), it might be very satisfying to be involved and see where that goes. Only you can decide on whether you think the restructure will be positive or negative for your career

Taking the redundancy now gives you a lot of financial freedom to plan your next steps carefully.

• You could take time to re-skill or make your skill-set more transferable to new roles that you may not have previously considered. You might choose to stay out of work for 6-12 months while you do this
• You could make a family decision to take a lower paid job but with the knowledge that you would be very close to being mortgage free at 40. That would also be a very satisfying place to be financially/mentally
• It could allow you or your spouse to go part-time for a few years for family reasons

If you take the package I would only use maximum half to pay down the mortgage. The opportunity cost of holding the rest in cash is not all that high for the time it takes you to get re-settled in your career

I would second this, decide what you want to do first before lumping it all on the mortgage. With childcare & mortgage payments, your monthly commitments will stay relatively high so it is better to have that available to you in cash if you plan to take time out or at least until you find a new role

Basically your next move should be based on your own job satisfaction and career path or for added value to your family life. Your finances are very healthy so you don't need to choose the highest paying role on offer, choose one that really interests you

 

[nest egg]

Looks like I should take the package! Let me summarise the main points, and my thoughts on them

1. Nature of the reorganisation / future prospects in the company - based on what I know so far, I see more reduction, rather than transformation. There's a greater likelihood I end up with fewer resources, and the same high expectations.
2. Indicating my intention to take the package - I would only do this once redundancies are formally announced. That being said, I believe being proactive & making my intention clear is the best approach, before anyone gives me the "good" news my role is being saved.
3. Clearing the mortgage - sage advice. Without a mortgage, there's less pressure to take a job for the sake of it. However if I earmark an amount to cover the repayments for a year, the net effect is the same, ditto for childcare. My wife's income would cover our other expenses.
4. My next move - My first reaction on hearing the news was that I didn't want to lose my job. My next reaction was, I need to get onto my network and find something similar elsewhere. However, the more I've started to come to terms with the idea, the more I'm starting to evaluate the path I'm on. Being discerning about my next role makes sense. It's early days, and needs more consideration. Professional assistance wasn't something that I'd immediately thought about (@PGF2016, do you mean a career coach?) but perhaps would be a good idea to tease this out further.

 

[cloughy]

Remember it's the role heat becomes redundant not the individual, so if your role is not in scope to be made redundant then you may jot get offered it. Then again maybe they want to reduce costs in which case they let those on higher salaries go and hope lower paid step up to take those roles.
Best of luck in whatever happens, and quality time with family and friends is worth a lot, and you only live once.

 

[PGF2016]

Professional assistance wasn't something that I'd immediately thought about (@PGF2016, do you mean a career coach?) but perhaps would be a good idea to tease this out further.

The company that made me redundant paid for a consultant to assist with CV and Linkedin profile creation and interview preparation.

There was no guidance to help with career progression, a change of path or choosing a new career. It was all about getting the next job. So I can't really comment on career coaching (assuming that is a different thing).

 

[rollingstone]

I've just been told that my role is to be made redundant, likely effective before the end of this year (consultation period with the employer just about to start). Been with the company almost 20 years so a lot of emotions going through me right now. Early 50s as well, so I think getting a similar role will be difficult - a friend in recruitment has been quite open with me on that (I work in Finance, in a multinational). Anyways, all that aside, I need to focus on the here and now. Can anyone provide some clarification on the following queries?:
- waiving the right to the pension lump sum. I am in a DC scheme, and the admin portal has a forecasting tool. Based on my current and projected contributions (assuming of course those contribution levels were to be maintained, unlikely now perhaps), at the age of 65 I could be entitled to a lump sum of approx €150k. If I waive the right during the course of redundancy discussions, does this effectively mean that this pension lump sum figure would then become fully taxable, and at the marginal rate?
- the annual company bonus is a discretionary payment (typically it is a significant amount). I will have worked the full year, but the related payment is made during quarter 1 of the following year, at which point I will have left the company. Probably have to suck it up, but has anyone been in a similar position, and negotiated a payment with the employer in lieu of same? I feel I have made the usual contribution for the full year, but ultimately my employment contract does state that it is discretionary.
- there are some good insights already on this thread, and the related forum so I'm reading up as much as possible on the topic. But if there is anything else that I should be considering or prioritising during this consultation period, I'd really appreciate your inputs.

Thanks in advance.

 

[nest egg]

Sorry to hear rollingstone. Tough times, but you seem to have a good sense of what's realistic, and are taking a level headed approach to your situation.

First question, do you know anyone in the company who has previously been made redundant? If so, get their details and call them up. They will be the best source of advice and preparation for the road ahead.

I've just been told that my role is to be made redundant, likely effective before the end of this year (consultation period with the employer just about to start). Been with the company almost 20 years so a lot of emotions going through me right now. Early 50s as well, so I think getting a similar role will be difficult - a friend in recruitment has been quite open with me on that (I work in Finance, in a multinational). Anyways, all that aside, I need to focus on the here and now. Can anyone provide some clarification on the following queries?:
- waiving the right to the pension lump sum. I am in a DC scheme, and the admin portal has a forecasting tool. Based on my current and projected contributions (assuming of course those contribution levels were to be maintained, unlikely now perhaps), at the age of 65 I could be entitled to a lump sum of approx €150k. If I waive the right during the course of redundancy discussions, does this effectively mean that this pension lump sum figure would then become fully taxable, and at the marginal rate?

Correct, though there wouldn't be a lump sum per se. You would roll your whole pension over into a ARF, annuity etc Once done it would be subject to tax once you start to draw it down.

Unless the tool you're referring to is something specifically provided as part of the redundancy process, it's unlikely to have any relevance. Per what I've researched, the actuaries use a formula to calculate a present value lump sum, which is actually based on your earnings and service-years, and therefore independent of your current pension pot.

- the annual company bonus is a discretionary payment (typically it is a significant amount). I will have worked the full year, but the related payment is made during quarter 1 of the following year, at which point I will have left the company. Probably have to suck it up, but has anyone been in a similar position, and negotiated a payment with the employer in lieu of same? I feel I have made the usual contribution for the full year, but ultimately my employment contract does state that it is discretionary.

Find out what your company policy is. You mention its a MNC so I'd be highly surprised if they don't have one. It should detail what applies for the bonus payment, ditto for RSUs (if applicable) and any other benefits.

- there are some good insights already on this thread, and the related forum so I'm reading up as much as possible on the topic. But if there is anything else that I should be considering or prioritising during this consultation period, I'd really appreciate your inputs.

Thanks in advance.

Assuming you'll receive an ex-gratia payment, tax relief is a really important topic. Given your length of service, SCSB is likely to be the most beneficial to you. Recommend to read up thoroughly on it, here's one link I came across, there are many others. Other things which come to mind include, how long they will continue to pay health insurance (if applicable), what support / training they will provide & will they offer time off for interviews.

Best of luck.

 

[rollingstone]

Thanks for the reply Nest Egg, appreciated. Yeah there's been few senior guys made redundant in the last few years so I have an idea of the deal they got and will follow up with one of them for a few pointers. As you say, tax relief is probably the most important thing now, to maximise the net payment I receive. I will definitely seek professional advice, legal and financial, as this will likely be the last such time I will receive a lump sum in my professional life, so I need to make the most of it. I think the company will make a contribution to such a service as well. After that, it's trying to work out what life has ahead for me, but sin sceal eile.........best of luck with making the decision in your own case.

 

[Sunny]

I really wouldn't write yourself off if you work in finance in your early 50's........Still plenty of opportunities out there. Even on the project/consultancy side if you have the experience.

There are plenty of threads here on redundancy and tax. If you work for a MNC, more than likely they will set you up with independent legal and financial advice. Generally, they tend to be quiet supportive when making these decisions. Usually, the rule is don't waive your right to a tax free amount under your pension in exchange for a higher amount after tax now. There are some circumstances where it makes sense but you need to do the maths and get advice. You won't be able to do anything the pension provider provides you with Present Value calculations which the company will arrange.

In the meantime, I would highly recommend updating your Linkedin Profile and start networking and getting in contact with people. It really has become critical in todays market.

 

[Blackrock1]

I really wouldn't write yourself off if you work in finance in your early 50's........Still plenty of opportunities out there. Even on the project/consultancy side if you have the experience.

There are plenty of threads here on redundancy and tax. If you work for a MNC, more than likely they will set you up with independent legal and financial advice. Generally, they tend to be quiet supportive when making these decisions. Usually, the rule is don't waive your right to a tax free amount under your pension in exchange for a higher amount after tax now. There are some circumstances where it makes sense but you need to do the maths and get advice. You won't be able to do anything the pension provider provides you with Present Value calculations which the company will arrange.

In the meantime, I would highly recommend updating your Linkedin Profile and start networking and getting in contact with people. It really has become critical in todays market.

yes, would echo this, no need to be writing yourself off, most finance experience is transferrable to a multitude of industries.

 

[Salvadore]

A significant organisational change at the firm I work for may mean redundancy is on the cards later this year. Due to my tenure, there could be a large ex-gratia payout (250-300k before tax). However, I've heard I may be one of a select few who management "fight" to retain.

I'm giving strong consideration to taking the package regardless, and indicating my preference/intention sooner rather than later, before anyone starts a process to retain my position.

Are you sure the choice is yours?

If the company really wants to retain your position, would it not simply be the case that no redundancy applies?

 

[nest egg]

Are you sure the choice is yours?

If the company really wants to retain your position, would it not simply be the case that no redundancy applies?

Yes, that's my problem, & why I think it's best to make my preference clear beforehand