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Debt & Retrenchment

With the current volatile economic climate, more and more companies are experiencing financial strain. Most companies' workforce contributes to their largest expense and therefore it is not surprising to find an increase in retrenchments. A couple of years ago the family of one of our team members were affected in a major way by this tendency. Her brother was retrenched a couple of weeks before the Christmas holidays.

Although he was aware of the difficulties the company experienced, stats showed him to be an exemplary employee and his retrenchment came as a complete shock. He had debt, mobile & internet contracts, a gym contract and a family who could not cover all of his expenses. He visited the various Credit and Service Providers and explained his predicament. Where he could, he cancelled agreements, made arrangements and relied on the numerous policies that he had signed up for over the years. Regrettably only one of these accounts had a retrenchment benefit and subsequently he was left with the remainder of his accounts. As for the service agreements, he would soon be faced with the reality that the cancellation of a service agreement is not a simple matter. Due to his requests for cancellation not being correctly loaded, and subsequently handed over to Debt Collection firms, he ended up battling Debt Collectors for months to come.

 

So how do you prepare for an unforeseen event like this?

  1. Contact your Creditors and obtain clarity on the exact credit life insurance premiums you are paying as well as the benefits that you are paying for.
  2. Enquire from your Creditors the correct procedure to follow in the event of not only retrenchment, but also death and disability.
  3. Contact your Service Providers and educate yourself on the policies, benefits and cancellation procedures in the event that you are unable to afford these services.
  4. Ensure that your premiums are paid every month, as a single lapse of payment can be responsible for the lapse of your policies. Never put your faith in any other person or company to safe guard the status of your policies.
  5. As with your Testament, Life Cover Policies and other Retirement Plans and Procedures you must have an emergency file compiled for the day retrenchment knocks at your door. In this file, which must be known to at least one other responsible person, you must list the relevant policies, contact details and procedures.
  6. Keep a Note pad in your files.

 

In the event of retrenchment:

  1. Ensure that you received all from your soon-to-be ex-employer that you need from them before leaving their employment:
    • Referral Letter;
    • Retrenchment letter;
    • Form UI-19;
    • All outstanding leave pay-outs and/or commissions.
  2. Contact your Creditors:
    You need to contact your creditors immediately after being informed of the impending retrenchment and confirm that you are now relying on this benefit with immediate effect. Confirm how long you are covered for, in the event that the entire balance is not settled. Be sure to acquire the email address or fax number, as well as the full details of every person you speak with and confirm anything discussed telephonically in writing. Make a note of this date and ensure that payments resume once the cover has run its full term.
  3. Cancel service agreements
    (Gym contracts, Cellphone contracts, Holiday Club, DSTV etc.) As above, confirm everything in writing. This will be your ammunition should the failure to cancel contracts correctly result in accounts being handed over for collection.
  4. Claim UIF
    You need to claim this no more than six months after date of retrenchment. They normally require the following:
    • 13-digit barcoded ID or Passport;
    • Form UI-2.8 for banking details;
    • Form UI-19 to show that you are no longer working for your employer;
    • Proof of Registration as a work-seeker.
  5. Actively search for employment
    Your monthly UIF pay-out and pay-out from your employer will not last forever. Your UIF pay-out will decrease monthly and some Credit Life Insurance Policies will only cover your instalments for a certain period of months.
  6. DO NOT use Credit and/or apply for further Credit to cover day-to-day living expenses.
  7. Once you have secured employment and your monthly debt obligations are more than your monthly income, seek the assistance of a Debt Counsellor.

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