Redundancy and Your IVA, Question by Question
How the different parts are treated, and what happens to your payments.
What happens if I'm made redundant during an IVA?
Redundancy is handled more flexibly than most windfalls. Because losing your job affects both your income and your need for a financial cushion, redundancy money is not simply swept into the IVA. Often you are allowed to keep the core redundancy pay to live on while you look for work, while any extra above the statutory amount may be treated as a windfall. Your supervisor assesses your particular situation.
Is redundancy pay a windfall?
Partly, and it depends on the type. Statutory redundancy pay, the legal minimum based on age and service, is often exempt, because it is compensation for losing your job and you will likely need it while finding new work. Enhanced redundancy, anything your employer pays above that minimum, more commonly counts as a windfall and may be paid in. So redundancy is rarely all-or-nothing.
How are the different parts treated?
Each element is looked at separately. The statutory redundancy element is usually the part you are most likely to keep. Enhanced or contractual redundancy above the statutory figure is more likely to be treated as a windfall. Your supervisor will look at the breakdown of your payment, alongside your living costs and job prospects, to decide what, if anything, should be paid into the IVA.
What about pay in lieu of notice or holiday pay?
Those are usually treated as income. Money that represents wages, such as pay in lieu of notice, accrued holiday pay or consultation payments, is generally regarded as ordinary income rather than a windfall, because it stands in for salary you would have earned. It is factored into your budget like normal pay. This is another reason the breakdown of a redundancy package matters.
What happens to my IVA payments now?
They will be reviewed, as your income has changed. Losing your job usually means your income falls, so your supervisor will reassess what you can afford. Your monthly payment may be reduced to reflect your new circumstances, and any retained redundancy money may be expected to help cover your contributions for a time. The aim is to keep the IVA affordable while you get back on your feet.
Can I take a payment break?
Often, yes. If redundancy leaves you temporarily unable to pay, many IVAs allow a payment break or reduced payments while you find new work, subject to your supervisor's agreement and your creditors. This breathing space is one of the ways an IVA can flex around a change like redundancy. The missed payments are usually added to the end of the arrangement rather than written off.
Do I have to declare a redundancy payment?
Yes, always. Even though redundancy is treated more generously than other windfalls, you must still tell your supervisor about it promptly. They need to see the breakdown to decide how each part is handled and to review your payments. Not declaring it is a breach of your IVA. Being open also lets them help you, for example by arranging a payment break if you need one.
Can I keep enough to live on?
That is the whole point of the flexible treatment. Supervisors recognise that redundancy money may need to cover your living costs and IVA payments while you are between jobs. You can usually retain a reasonable amount for that purpose, with any genuine surplus, especially enhanced pay, contributed. If money is tight, say so; the system is designed to keep you afloat, not to leave you destitute.
Should I get advice?
Yes, redundancy raises several questions at once. A free, impartial adviser can help you understand how your particular payment will be split, what happens to your contributions, and whether a payment break makes sense. They can also help if you disagree with how your supervisor treats the money. Do not spend a large redundancy payment before getting advice and your supervisor's view. It costs nothing to ask.
