66% of people surveyed for the Old Mutual Savings and Investment Monitor said they feared losing their job. It is important to understand what benefits you have if you are retrenched.

Accepting a voluntary retrenchment package provides the same retrenchment rights and you should still be issued a 189 letter. This is important because it allows you certain benefits.

You can receive up to R500 000 tax free, made up of your severance package and any withdrawal from your company retirement fund. This is assuming you have not used this tax benefit before. Keep in mind that if you use it, you will not receive a tax-free lump sum at retirement.

Many short-term loans such as store cards, credit cards and personal loans may have credit insurance which covers your installments for up to a year if you are retrenched. Notify your credit providers as soon as you are retrenched to lodge your claim and discuss other options around restructuring your debt.

Your insurance policies may include retrenchment cover that waives your insurance or retirement premiums ensuring you still have cover in place. However, you need to notify the insurer rather than just leaving the policy to lapse. If you do not have a retrenchment benefit, discuss other options. Now is not the time to lose important insurance protection.

As a final tip, don’t rush to settle your debts with your package. If you use your funds to pay off all your debts, you will have no money to live on. Rather work out how much you need to live each month, budget for the monthly repayments and make your package and UIF benefits last as long as possible. It may take longer than expected to find work, especially in the current economic climate.

Facing retrenchment is a very frightening experience, but you can manage the stress and financial fallout if you have a plan in place and understand your options.

Next time on Money Matters, we speak to a labour lawyer on understanding your UIF retrenchment benefits.