A redundancy payout can feel like a windfall. It is not. It is runway. ✈️ How you use that runway can shape the next five years of your career, so it is worth slowing down and making a deliberate choice rather than drifting.
Broadly, IT professionals use a payout in one of three ways: upskilling, contracting or taking a planned pause. Many combine them. This guide walks through each option, who it suits and the questions to ask yourself.
Please note: this is general information, not financial advice. For decisions about tax, super or investments, speak to a licensed financial adviser or accountant.
First, know your numbers
Before choosing a path, work out:
- Your total payout after tax, including leave
- Your essential monthly costs: housing, food, transport, insurance, loan repayments
- Your runway: payout plus savings divided by monthly essentials
- Any big expenses coming up in the next 12 months
If your runway is six months or more, you have room to choose. If it is two or three months, prioritise income while you plan the longer game.
Option 1: Upskill
Using part of your payout to learn a high-demand skill can lift your earning power for years. The key is choosing skills the market is actually paying for, not the ones with the best course marketing.
How to choose:
- Search current job ads for the roles you want and note the certifications and tools that appear repeatedly
- Ask two or three recruiters which skills are hardest to find
- Favour skills that build on what you already know
Areas with strong demand in Australia include cloud (AWS, Azure), cyber security, data engineering, ServiceNow, Salesforce, Dynamics 365 and Power Platform, and SAP S/4HANA. See certifications that matter.
Suits: people with a solid runway, those changing direction, or anyone whose current skill set is shrinking in demand.
Option 2: Contract
Contracting can bring income in quickly, keep your skills fresh and avoid a long gap on your CV. Many IT contracts start within days of an interview.
Things to consider:
- Set a realistic day rate. Read day rates explained
- Decide on PAYG, ABN or Pty Ltd. See how to become an IT contractor
- Remember there is no paid leave, so build that into your rate and budget
- Keep some of your payout as a buffer between contracts
Suits: people with in-demand skills who want income and flexibility, or who want to test a new industry before committing.
Option 3: A planned pause
Some people use the time for family, health, travel or simply recovering from burnout. That is a legitimate choice. The key word is planned.
- Set an end date and a rough budget
- Keep one foot in the market with a monthly coffee or meetup
- Do a small amount of learning so you return confident
- Prepare a simple explanation for the gap
Suits: people with a strong runway, those who need rest, or those with family priorities.
Combining the options
Many people do a mix: two weeks off, a short certification, then a contract while they look for the right permanent role. That keeps income flowing while they invest in the future.
| Option | Main benefit | Main risk |
|---|---|---|
| Upskill | Higher long-term earning power | Choosing a skill the market does not need |
| Contract | Fast income and momentum | Gaps between contracts, no paid leave |
| Pause | Rest and reset | Drifting without a plan |
Questions to ask yourself
- Is my current skill set growing or shrinking in demand?
- What would I regret not doing in the next year?
- How much risk am I comfortable with?
- What do the people who depend on me need?
- Where do I want to be in three years?
Mistakes to avoid
- Spending a large chunk on an expensive course without checking job outcomes
- Treating the payout as spending money
- Waiting too long before starting a job search
- Making big financial commitments in the first few weeks
A real-world example
A business analyst made redundant from an insurer had a runway of about eight months. She took two weeks off, then spent six weeks completing a Power Platform certification while doing a few hours a week of volunteer process mapping for a charity. That gave her a fresh skill and a concrete project to talk about. Within three months she landed a contract as a Power Platform BA, which later converted to a permanent role with a pay rise on her old job. The payout funded the bridge, not a holiday from reality.
Frequently asked questions
Should I use my redundancy payout to study?
It can be a good investment if you choose a skill that employers are actively hiring for. Check job ads and talk to recruiters first.
Is contracting a good option after redundancy?
For people with in-demand skills, contracting provides fast income and keeps skills current. Keep a buffer for gaps between contracts.
Is it OK to take a break after being made redundant?
Yes, as long as it is planned, budgeted and you stay connected to the market.
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