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What you need to know if you lose your job

Make plans to deal with your financial obligations if you are retrenched. Ask your credit providers to help you find a way to manage until you get a new job./123RF
Make plans to deal with your financial obligations if you are retrenched. Ask your credit providers to help you find a way to manage until you get a new job./123RF

The low levels of economic growth have put added pressure on employers to restructure their workforce, leading to widespread retrenchments across sectors.

Losing your job can be disruptive and to help you navigate through the maze of frustration, Money has, with the help of experts, compiled this guide:

UIF: You have a right to claim for unemployment benefits from the Unemployment Insurance Fund (UIF) at your nearest labour department, provided you had been contributing while working.

You must apply for it within six months of losing your job and if you had been contributing for four years or more, you can claim for up to 238 days or until you start working again. Claims of one day for every six days worked apply for shorter contribution periods.

Insurance: The first thing to check is whether you have any cover for retrenchment on your policies. Casey Rousseau, marketing manager for 1st for Women Insurance, says their policies have a retrenchment premium waiver and if you have taken this out as an add-on product it continues to pay for your short-term insurance premiums for up to six months while you are without a job.

If you have taken out an income protection policy from a reputable life insurer, it may or may not cover retrenchment, advises product development actuary at Sanlam Personal Finance Karen Bongers.

Bongers advises you to know exactly what you buy, what the policy will cover and until when it will provide you with that cover.

Insurance is often one of the first expenses to go when budgets are tight, and while it may provide temporary relief, not having cover can have massive financial implications in the event of the unexpected, warns Susan Steward, marketing manager at Budget Insurance.

If you are not able to pay your insurance premium, let your insurer know. The Short-Term Insurance Act's policyholder protection rules say you have up to 30 days to pay your insurance premiums before your policy lapses or claims can be rejected.

Medical scheme cover: Try to keep your medical scheme cover at all costs, and if you worry that it may take you longer to find a job in the event of retrenchment, consider downgrading to cheaper options.

Discovery Health's head of research and development Deon Kotze says you should consult a financial adviser to assist with a full financial and medical needs analysis and restructure the overall insurance arrangements to retain appropriate cover at a lower cost, rather than doing away with medical insurance altogether.

Julie Reddy, membership specialist at administrator Sechaba Medical Solutions, says while most medical schemes only allow for switching options either up or down at the beginning of every benefit year, retrenchments occur any time. In the unfortunate event of redundancy, if your scheme does not allow a downgrade, you can submit a motivation for this to the scheme for consideration.

She suggests comparing value for money across schemes and options. A hospital plan may be an option as at least it covers your family in the event of unforeseen emergencies requiring hospitalisation.

Kotze adds that network-based medical scheme options offer you extensive cover at designated service providers at lower contributions than for plans that cover all hospitals and doctors.

Credit agreements: Benay Sager, chief operations officer at Debt Busters, says in many cases when you take out credit agreements, such as personal loans and store credit accounts, you are obliged to take out credit life insurance. The insurance should pay your credit repayments on your debt for a period of between six to 12 months. If you have lost the credit agreement, ask the credit provider for a copy, he advises.

If you lose your job, tell your credit providers so that any failure on your part to pay your instalment listed with the credit bureaus will reflect this as the reason.

The National Credit Regulator (NCR) says while the National Credit Act cannot force credit providers to assist you with lower payment options, there are cases where credit providers assist consumers to renegotiate their contracts.

An alternative, should you have any other form of monthly income, is to enter into debt review, which can offer relief in the form of lower repayment on credit agreements.

If you have received a retrenchment package, you can arrange a settlement amount with your credit providers and close those accounts, says the NCR.

Pension fund: The Pension Funds Act allows you to withdraw from your pension fund when you leave the fund. You must, however, familiarise yourself with the risks of doing this - it may severely compromise your income on retirement and should only be done as a last resort. You may also incur tax, cautions Sager.

The South African Revenue Service allows you to take R500,000 of a severance benefit tax-free, and the balance is taxed at rates of 18%, 27% and 36% depending on the amount. However, if you have used your R500,000 tax-free benefit on retrenchment you will not enjoy it again on retirement.

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