Voluntary redundancy is when an employer asks employees if they want to leave the company for a financial reward. Here’s what you need to know about it.
If a company is in financial difficulties and needs to make cutbacks, or simply doesn’t need as many staff it used to, it might ask employees to volunteer to leave their positions in return for a payout. This is likely to be more than would be paid under compulsory redundancy. It’s commonly referred to as ‘voluntary redundancy’.
If your employer asks you to consider voluntary redundancy, you’re under no obligation to do so; as the name suggests it’s entirely voluntary. Similarly, if you volunteer, your employer is under no obligation to offer it to you.
The important thing to remember is that employers usually (but not always) offer more generous terms to staff who volunteer than they will pay if they have to make compulsory redundancies. This might be in the form of a larger redundancy payment than your statutory or contractual entitlement, a longer period of notice than you’re entitled to, and/or being paid in lieu of your notice period.
Refusing voluntary redundancy will not affect your entitlement to statutory or contractual redundancy pay if you’re dismissed for redundancy in the future.
You should think very carefully before accepting voluntary redundancy terms. For example, while the amount may seem to be a lot, you should seriously consider whether it will last until you find another job. If you have financial commitments, it’s important to consider how you will continue to meet those obligations. Carefully check the terms of any mortgage or loan protection insurance and whether it will affect any right you have to claim benefits.
The amount of money you should receive as part of a compulsory redundancy depends on a number of factors. To better understand what you're entitled to, read our article on what you can expect to get if you’re made redundant.
No rules apply to how much your employer can offer you for a voluntary redundancy, but you should generally expect it to be more than you would receive for a compulsory redundancy. Your employer should tell you what they are offering – it’s likely to take into account factors such as how long you've been with the company and your current salary.
It’s a good idea to ask for this information to be given to you in writing before you decide whether or not to accept any offer your employer makes. You may be given the opportunity to discuss the payment in order to try to negotiate a more generous arrangement. Or your employer may simply offer it to you on a ‘take it or leave it’ basis.
Once the offer is made, it’s up to you to decide whether or not to accept the voluntary terms. If there’s room for negotiation, you may want to consider engaging a third party, such as a solicitor or trade union rep, to negotiate for you. If you’re a member of a union, it’s a good idea to talk to them because they may be able to arrange for a lawyer to help you without any cost to you.
If you accept an offer of voluntary redundancy, you will effectively be agreeing to bring your employment to an end. However, it is not the same as a resignation. You will still be entitled to claim statutory redundancy rights, such as a reasonable amount of time off to look for a new job.
Your employer will need to discuss the redundancies with you to ensure you understand your rights. They should inform you of how and when the redundancies will take place, what your compensation will be, how long your notice period will be and whether or not you’ll be required to work it. Make sure that your employer gives you a letter setting out the details of your redundancy and take the opportunity to ask any questions that you may have.
Your employer may ask you to sign a settlement agreement in which you sign away any statutory rights you have, such as the right to claim unfair dismissal. They may prefer to do this in order to avoid the time-consuming process of consulting and meeting with you and your colleagues.
In some cases, your employer may make their offer subject to you signing such an agreement. You shouldn’t sign a settlement agreement until you have received legal advice – normally your employer will pay for this.