What Is The Cost of Stability?

L30Something on 16/09/2015 - 08:51
Last edited 18/09/2015 - 11:47

UPDATE I am genuinely very greatful for your comments and advices.This community is definitely something to cheerish for. I was inclining towards taking a package.However my new manager in temp role is really great to work with and I am really enjoying this temp role. In saying that $50k after tax is a one in a lifetime opp and worth taking risk for.
Thank you all.
Mod please delete this if you like. I have got what I wanted.
Hello all

I would like to get your opinion on a situation that I am facing.

My role was made redundant and my severance package is approx. $50k. As part of process I was able to secure a 4 month temp secondment with my company. My current manager (temp secondment) really likes my work and wants to offer the role permanently.If I accept it then I lose the package.
Now question is whether I accept the package ( a cool $50k in bank) or accept the permanent role (stability)?

My background

Chartered Accountant with 9 yrs exp.
Track record of achievements throughout my career.
32 age

Some points for consideration

I was thinking to move to a different industry prior to my role being made redundant.(working in manufacturing so not a great future ahead)
I have had 2 recent interview where I performed really well but was beaten due to other candidate having more experience.( appreciate that market is currently flooded with senior officials opting for lower pay jobs)
Single income with 1 kid.However my monthly fixed is only around $3k so package will last 16 months.
Been working for last 13 years with only few week break each year. Opportunity to take 2 month break

So what would you do if you are in my situation? Take the money and hope you land a job in 3-4 months or Opt for stability and accept permanent position?
UPDATE : $50k is after TAX

Education & Work

Comments

TailsK on 16/09/2015 - 08:58

+2

Do you enjoy your job and the company you work for? If the answer is no, then take the package. If the answer is yes, only then should consider staying. Maybe it's an opportunity to ask for a pay rise as well?

If you haven't already, I'd also be asking your manager about your entitlements and if they all carry over if you take the new role.
- 30Something on 16/09/2015 - 10:51
  
  Yeah i am actually really enjoying the 4 month secondment. Its like project work so no repetition in work. Also I get to travel around Australia which is an awsome perk in my view.
  - conan2000 on 17/09/2015 - 20:13
    
    You may find the travel wears thin after a while. In the same situation I would definitely take the money and go. Not being an accountant, not sure how good the market is, but I can't imagine it will take 16 months to find a job. There are very few times you'll get a $50k cash influx in your life, and the opportunity to take a long break (spinds like you haven't had any good ones in a while) so I'd definitely take it.
scotty on 16/09/2015 - 09:08

+9

The fact is that you have been made redundant in the first place means that there's really nothing that's "permanent". Who knows that the 4 months temp would really be turned to a permanent position? Or even if it does become permanent, with the current economy condition, how long would that job last?

It seems that you have already decided that (1) 50k is a good deal (2) time to move on to a different industry (3) good to have a break, maybe you should just take it.
- 30Something on 16/09/2015 - 10:53
  
  You read my mind mate…
burningrage on 16/09/2015 - 09:15

+1

My suggestion would be to take the package as what they call "permanent" may not be THAT permanent once you're in it. As Scotty said, who knows things may change after 4 months.

You could do with the break as well.
- 30Something on 16/09/2015 - 10:55
  
  But what about stability.. Are you saying $50k after tax is worth taking risk?
  - burningrage on 16/09/2015 - 13:59
    
    Yes.
    
    You said that package would last for 16 months. I think after one or two months you will want to get back and looking again.
    
    Spending time with kid is a great feeling.
inherentchoice on 16/09/2015 - 09:32

The severance package will be taxed. Are you saying it's $50k after tax?

I think I would take the package if I were you. I took such a package a few years back and don't regret it at all. I'm nowhere near as qualified as you and I work in a pretty niche job.
- mskeggs on 16/09/2015 - 09:44
  
  +1
  
  The severance package will be concessionally taxed, and if his 9 years is with this employer it may be tax free.
  If I had this choice at 32yro I would take the package without hesitation.
  In fact, I took a voluntary redundancy when I was 29 then spent 9months as a stay at home Dad with my then 1yro. It was great time (although finfncially I should have gone straight back to work and used the money for a deposit on an investment property!).
  - inherentchoice on 16/09/2015 - 09:45
    
    The year I got my package is the year I paid the most tax I ever did.
    - mskeggs on 16/09/2015 - 09:50
      
      +2
      
      See the tax tables here:
      https://www.ato.gov.au/Individuals/Working/In-detail/Leaving…
      
      You get a base payment that is tax free that grows for each year of service. It is a bit over $50k after 9yrs.
      If your payment exceeded the tax free amount, well done! It is great to pay tax from high income, and only the excess is taxed, albeit at your marginal rate.
      If you paid it incorrectly you can seek to amend that year's return.
    - inherentchoice on 16/09/2015 - 09:56
      
      @mskeggs:
      
      Hmm I might have to research that a little.
      
      But based on the information here it seems OPs payment will be subject to 32% withholding.
      
      https://www.ato.gov.au/Rates/Schedule-11---Tax-table-for-emp…
    - mskeggs on 16/09/2015 - 10:28
      
      +1
      
      @inherentchoice:
      
      But from the same section:
      https://www.ato.gov.au/Rates/Schedule-11---Tax-table-for-emp…
      "Tax treatment of ETPs
      ETPs can comprise of two different components:
      Tax free component
      Taxable component.
      You only withhold from the taxable component."
      
      See example 4 here:
      https://www.ato.gov.au/Rates/Schedule-11---Tax-table-for-emp…
      
      Showing the tax free component is based on the years of service as it is a genuine redundancy.
      As an aside, the ATO could start using examples that reflect the most usual circumstance, as it is they seem to use examples only to illustrate edges cases.
      
      I will be delighted if I have helped you find a tax rebate!
    - 30Something on 16/09/2015 - 11:11
      
      @inherentchoice:
      50k is after tax
    - inherentchoice on 16/09/2015 - 11:20
      
      @mskeggs:
      
      Ok.
      
      Well I found my old documents which explain that I'm ineligible for the ETP tax concessions as there was a class ruling which determined that my situation was NOT a genuine redundancy…
      
      http://law.ato.gov.au/atolaw/view.htm?docid=CLR/CR201144/NAT…
rambutann on 16/09/2015 - 09:44

Take the $50K and take 6 months off.
- scotty on 16/09/2015 - 10:09
  
  +6
  
  Just need to make sure don't blow all of $50k on OzBargain front-page items in a week, especially that $40k 98" LG UHD TV (that got moved to the forums).
  - 30Something on 16/09/2015 - 11:13
    
    +2
    
    Hahaha mate i run a tight budget when i am working… With no work it will be down to bare minimum
    I am hoping to save atleast 70% of my package
- 30Something on 16/09/2015 - 11:13
  
  Love it
geek001 on 16/09/2015 - 10:04

+2

Take the package and take a break but keep in touch with your current manager, you may get recycled back as a contractor on contractor rates. :)
v2 on 16/09/2015 - 10:21

+3

i was in the same situation last year. quite happily took the package considering
(a) i was confident to find new opportunity soon
(b) wanted to have some time (paid) off (~3 weeks) to spend with my young kids (as many say cherish these moments as they may never return).
(c) devote some time to reflect what you really want to do - most of us are in the job purely to pay off mortgage and help run the household. but you may wish to do completely opposite or start something of your own. goes back to the thought on what you'd be doing if money was not an issue.
(d) it helped lowered my mortgage considerably
(e) you will never get paid to leave work :) so consider this as your big fat bonus that you really deserve (rather than what you are given during annual performance review)

if you had worked for only couple of years and your bonus was less than 10K - then i would have considered to accept the permanent role offered to me for stability.

Good luck and i hope all works out the way you want for you and your family!
- 30Something on 17/09/2015 - 00:23
  
  Thanks mate that's really good advice.
  The biggest problem i am facing is that i am really enjoying this temp position.. Its an autonomous role so offers great flexibility..
  Plus i get to travel around Australia… Already booked 6k velocity points in a month
KaTst3R on 16/09/2015 - 11:59

You got 4 months to find a new job + keep the $50k. Delay accepting it as long as you can, at least you got a backup plan.
jaybmate on 16/09/2015 - 12:55

With 16 Months pay, I think they'd figure it would be cheaper for them to just give you a temp job for 12-16 months and not pay you out. At least they get you working in that time and will likely cost them less money, even if all you do is sit around and twiddle thumbs.
djones145 on 16/09/2015 - 13:26

does ur company offer long service leave?
cause after 10 years u get 3 months
how much off are you?
you should check if the temp role means u continue service and maybe get to that 10 year mark!
although some companies if you redundant after 7.5 years u get access to long service
- 30Something on 16/09/2015 - 13:41
  
  My current employment conditions apply.
  9 years is total experience
  With this company its only 7 years
  - burningrage on 16/09/2015 - 14:00
    
    Sweet. Long Service Leave payout triggered.
    - 30Something on 17/09/2015 - 00:20
      
      Yeah it did ;). But i didnt consider it since i will get it anyway whenever i leave
Wonka on 17/09/2015 - 07:52

Watch out for the feeling around loss aversion - https://en.m.wikipedia.org/wiki/Loss_aversion

Basically people feel loss more than gain.

A great example of how this applies is at Zappos (shoe seller in the U.S.) - they offer new hires cash to quit after the initial training. It's a one time offer though. What happens is that most people don't quit at the initial offer and then don't quit latter after (or not for a long time) because people would feel silly for not quitting when they could have got the money for quitting upfront.

Here's a pod cast with a better explanation http://freakonomics.com/2011/09/30/new-freakonomics-radio-po…

So how will you feel in 6 months time? Would you ever want to leave the company of your own will if you've turned down the redundancy?
boccos on 17/09/2015 - 11:41

If the people you would be working with are great and would be a support to you, then a permanent job is far better than a payout and no job. If you are confident of getting another job in what has become a very very competitive job market, and are willing to take the risk on a your "new" boss being a nice supportive person making for a good work environment, then take the payout and enjoy.
- 30Something on 17/09/2015 - 14:35
  
  That's is the biggest issue mate.my new boss is great and my company is very family oriented that is no body gives u a look for taking time off to look after a sick kid..
  Plus my role being autonomus i can work from the beach if i want to :)
  But 50k after tax is not small
v2 on 23/09/2015 - 10:16

good luck!

What Is The Cost of Stability?

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