What is voluntary redundancy?

When an employee has a say in their redundancy, the process is much smoother

First published on Thursday, Jun 04, 2020

Last updated on Tuesday, Jun 25, 2024

No business enjoys bringing its workforce bad news. Redundancy is just that.

But there’s a way to make it a little less upsetting. You can offer financial incentives for an employee to resign with, making the process more amicable on both sides.  

Read our guide and get yourself up to speed on this more agreeable alternative.

What is voluntary redundancy?

It’s a chance to offer your staff a fair package, and to try to end on good terms. If an employee agrees, it means you spend less time making compulsory redundancies.

But it’s important to remember there’s a big difference between compulsory and voluntary redundancy. The former has a selection process, which then determines the roles and employees set to face redundancy.

The latter is more likely to send your ex-staff away with a good feeling than compulsory redundancy would.

If you wrote in your contractual terms you'll seek volunteers in a redundancy situation before any compulsory redundancies, you must stick to this obligation.

Make sure you have a voluntary redundancy process in place so you can follow it.

You can read our guide to find out a bit more on compulsory redundancy.

Your employees’ voluntary redundancy rights

It’s important to understand employment law and voluntary redundancy. As if you don’t, you may breach some of the rights of your workforce.

If one of your staff decides to volunteer for redundancy, they can get statutory redundancy pay as long as they have at least two years' continuous service with you.

Is there a typical package you to offer your staff?

When you build a voluntary redundancy pay package, remember your aim is for your staff to agree to what you're going to offer them.

There's more chance of an ex-employee having good things to say about your company if they've left on good terms.

Packages vary from business to business. You could offer a week's pay for each year of service. Or, you might offer something more lucrative—for instance, six months' pay. Or, even a full year's pay.

When working out what sort of package to offer, you should think about:

  • The length of your employee's notice period.
  • The time it could take them to find a new job.
  • Any benefits their contract entitles them to.

Decide the maximum that you'll offer an employee, and keep this amount in reserve. Why?

Well, if you're willing to offer up to 12 months' voluntary redundancy pay, perhaps begin by offering six months'.

Some staff will try to negotiate a better package, and since voluntary redundancy is voluntary, if you refuse to up your offer, they have the right to turn it down.

In this case, if they turn it down, you can offer more of the amount you're already happy to offer.

Redundancy is a delicate matter. For some employees, when you choose them for redundancy, you'll hurt their pride and their feelings.

The reasons why you need to cut your budget and your personnel won't be important to them. You might have to deal with one or two troublesome employees who refuse your voluntary redundancy offers simply to spite you.

Remember, there’s a statutory minimum redundancy limit you have to keep in mind. You can use the government’s official calculator to stick to it.

Here are some important voluntary redundancy rules

You should keep written records of your voluntary redundancy process for each employee.

Written proof you have a fair procedure will work in your favour if your employee tries to make a claim against you.

Write your employee a voluntary redundancy letter explaining what happens when they take voluntary redundancy.

Make clear you're offering a voluntary redundancy and clarify the amount you're offering. In the letter, also include:

  • Information regarding the employee's notice period. Will they need to work it? Or, will you pay them in lieu of notice?
  • Will they need to use their remaining holidays, if they have any? Or, will you pay them in lieu of these?
  • Are they eligible for any bonus or commission pay?

You could also take this moment to apologise for the unfortunate nature of the situation.

Sometimes you'll have to fall back on compulsory redundancy

Voluntary redundancy rejections will mean you'll have to make compulsory redundancies. Make sure that you use fair criteria when choosing whom you let go. Fair criteria include:

  • Disciplinary record.
  • Absence record.
  • Lateness record.
  • Performance.
  • Qualifications.
  • Skill level.

When reviewing an employee's absence and lateness, you should make sure that you check whether any instances of absence or lateness were due to a disability or any other protected characteristic.

Here are some good reasons for voluntary redundancy

So, why should you choose this option over compulsory? Let’s take a look at the benefits of allowing employees to voluntarily resign:

  • Cost saving: By reducing your headcount you can save funds, a useful tactic for businesses with financial issues.
  • Avoiding compulsory redundancies: You can make an employee’s departure more amicable, which can have a positive impact on future relations.
  • Positive for workforce morale: If you take a more progressive approach to redundancies then it can place your workforce at considerable ease. It’s a negotiable option that allows them to leave your business with dignity.
  • Reduce the risk of discrimination claims: Voluntary redundancy is a good business practice as it provides the employee with choice. And when it comes to a redundancy, it helps to ease the stress of the situation and create a situation that offers them some advantages.

Need to make some redundancies?

Dismissals and redundancies are stressful for you and your employees, so get in touch with us if you’re struggling. We can provide expert advice on how to end the matter amicably.

Lucy Cobb

Employment Law Specialist

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