Rather than face redundancy and risk the chance of facing debt management problems caused by a lack of income, the Confederation of British Industry (CBI) has proposed that workers stay at home on reduced wages.
The plan is designed to help companies through the downturn by offering an “Alternative to Redundancy”, which would see the Government and companies contributing to a lower wage.
On the new scheme, workers over 25 would receive at least £128.60 a week, with the Government paying £64.30 — equal to the current jobseeker’s allowance — and the employer contributing the same, or more if they wished. Workers under 25 would receive slightly less, as the jobseeker’s allowance is £50.95 for under-25s.
Whilst this may not be enough to fight any outstanding debt problems, it is certainly better than the prospect of being out of work for a long period.
John Cridland, the CBI’s deputy director-general, said: “Businesses will be more able to cope with sharp drops in demand and prepare for recovery, while workers benefit from improved financial support and a door that is kept open for six months.”
“This is not about businesses ducking their redundancy responsibility — in fact, if a scheme runs for six months and a redundancy is still made, then the business will end up paying more.”
Debt advice organisations have greeted the proposals with mixed response, as some are concerned that debt management issues may arise on such a reduced income for some workers.
Ivan Cooper, Chairman at the UK’s leading debt management company Chiltern, Said: “For the six months or so that the employee is on a basic wage, their mortgage, council tax, loans and any credit card debts will still need servicing.
“Debt problems could arise if the worker was used to receiving a higher salary and they don’t receive any redundancy payment.
“Plus, whilst these new proposals sound good in principle, there is still no guarantee that the worker won’t be made redundant after the six-month period. In some ways this could just prolong any debt management issues.”
If workers do face debt problems in the period that they are receiving a substantially lower wage, they should seek impartial debt advice as soon as possible. Signs that debt problems may be forming include defaulting on loans or credit card debts, spending more than you earn each month and also using a credit card to pay for fuel, food or for cash advances.
Reputable debt advice organisations, such as The Debt People, Hamilton Locke and Chiltern, offer a number of solutions to tackle debt problems.
These include Debt Management Plans (DMPs), Individual Voluntary Arrangements (IVAs) and Trust Deeds amongst others. These professional debt solutions enable multiple outstanding unsecured balances (like personal loans, store cards and credit card debts) to be gathered into one monthly payment.
This monthly payment is based on affordability and makes finances simpler and more manageable.
For immediate debt advice, or for further information on Debt Management Plans (DMPs), Individual Voluntary Arrangements (IVAs) or Trust Deeds, Please call the number at the top of this page.