Voluntary Redundancy What is voluntary redundancy? Understand how voluntary redundancy works, whether to accept, and your rights and payments.
Last updated: 30 January 2025 Voluntary redundancy offers a choice, often with enhanced terms, but requires careful consideration.
What Is Voluntary Redundancy?
Definition
Voluntary redundancy is when:
Element Meaning Employer offers Opportunity to leave Employee chooses To accept or not Enhanced terms Usually better than statutory Selection by choice Not imposed
How It Works
Stage Process Announcement Employer seeks volunteers Application Interested employees apply Consideration Employer reviews applications Acceptance Some/all volunteers accepted Redundancy Employment ends
Why Employers Offer It
Benefits for Employers
Benefit Explanation Avoids selection No difficult choices Better morale Feels fairer Less conflict Employees choose Reduces claims Lower tribunal risk Goodwill Even with leaving employees
Common Situations
Scenario Why VR Offered Restructuring Need fewer roles Cost cutting Reducing headcount Site closure Winding down Merger Duplicate roles
The Offer
Typical Package Components
Element Common Terms Statutory redundancy Minimum entitlement Enhancement Additional payment Notice pay Full contractual/statutory Holiday pay Accrued untaken leave Other benefits Reference, outplacement
Enhanced Payment Examples
Enhancement Type Example Higher multiplier 2 weeks per year (not 1) No cap Actual salary, not £700 cap Minimum payment At least £10,000 Additional sum Plus £5,000
Deadline
Offers typically have:
Feature Detail Closing date For applications Decision date When you'll know Start date When scheme opens
Should You Accept?
Questions to Consider
Question Think About What's the package worth? Calculate total What are my job prospects? Market conditions How secure is my current job? Might be compulsory later? What are my financial needs? Mortgage, family, etc. What about my career? Future plans Tax position? How much do I keep?
Pros of Accepting
Advantage Consideration Enhanced payment Better than statutory Control You choose Plan ahead Know the date Positive reference Leave on good terms New opportunity Might be right time
Cons of Accepting
Disadvantage Consideration Lose job Security Job market May be competitive Age/timing May not be ideal Like the job Not ready to leave Compulsory unlikely Might be safe
Application Process
How to Apply
Step Action Read details Understand the offer Calculate What you'd receive Consider impact On your situation Submit application By deadline Wait For decision
What to Include
Element Content Expression of interest That you're volunteering Reason Why you want to go (optional) Leaving date Preferred if options Questions Any clarifications needed
Employer's Decision
Selection from Volunteers
Employer may accept:
Approach Meaning All volunteers Everyone who applies Some volunteers Based on business need None from certain areas Need skills retained
Rejection Reasons
Legitimate Reason Problematic Reason Business-critical skills Discrimination Too many volunteers Personal grudge Role still needed Inconsistent treatment Project completion Arbitrary selection
If You're Rejected
Option Action Accept decision Stay in role Ask for reasons Understand why Challenge if unfair Grievance if appropriate Ask to be reconsidered If circumstances change
Terms and Conditions
Common Conditions
Condition Typical Requirement Confidentiality Of package terms Reference Agreed wording Restrictive covenants Non-compete may continue Settlement agreement Waiving claims
Settlement Agreement
Often required for enhanced payment:
What It Does Benefit Waives claims Against employer Sets out terms Clear agreement Requires legal advice Protected position Tax efficient Proper structuring
Tax on Voluntary Redundancy
The £30,000 Exemption
Element Tax Treatment First £30,000 Tax-free Above £30,000 Taxed as income NI Usually no NI on redundancy
What Counts Towards £30,000
Included Not Included Statutory redundancy Outstanding salary Enhanced redundancy Holiday pay Ex gratia payments Contractual PILON
Notice Pay (PILON)
Type Treatment Contractual PILON Taxed as earnings Non-contractual PILON Complex - PENP rules Worked notice Normal tax
Withdrawing Application
Can You Change Your Mind?
Timing Position Before acceptance Usually can withdraw After acceptance May not be able to Check terms Some schemes lock in
Employer Withdrawal
Can employer withdraw offer?
Situation Position Before acceptance Usually yes After acceptance May be binding Contractual terms Check what was promised
Negotiating
Can You Negotiate?
Aspect Negotiable? Standard package Usually fixed Individual circumstances Sometimes Leaving date Often flexible Reference Reasonable requests
What to Negotiate
Item Request Higher payment If justifiable Later leaving date More time Garden leave Instead of working Reference wording Agreed terms Outplacement Support finding new job
Compulsory Redundancy Alternative
If You Don't Volunteer
Possibility Consideration Job may be safe VR fills quota May face compulsory If VR insufficient Different package Compulsory may be less Selection process May have to go through
Comparing Packages
VR Package Compulsory Package Often enhanced May be statutory only You choose You're selected Leave on good terms May feel forced Planned exit Less control
After Accepting
Next Steps
Action Timing Confirm in writing After acceptance Agree leaving date Set final day Handover Transfer work Final pay Receive package Reference Obtain agreed reference
Job Search
Action Consider Start looking As soon as decided Notice period Time to search Outplacement If offered Networking Use contacts
Practical Tips
Before Applying
Action Why Calculate package Know actual value Assess job market Realistic prospects Financial planning What you need Talk to family Big decision Get advice If unsure
Questions to Ask
What's the total package value?
What are the tax implications?
Is a settlement agreement required?
What reference will be provided?
Can the leaving date be negotiated?
What happens if rejected?
Are compulsory redundancies likely anyway?
Frequently Asked Questions
What is voluntary redundancy? Voluntary redundancy is when an employer asks employees to volunteer to be made redundant, usually with an enhanced package. Instead of selecting who goes, the employer invites applications and accepts some or all volunteers.
Should I take voluntary redundancy? It depends on your situation. Consider: the package offered, your job prospects, financial security, career plans, and whether compulsory redundancies might follow anyway. There's no right answer - it's a personal decision.
Can I be refused voluntary redundancy? Yes. Employers aren't obliged to accept every volunteer. They might reject applications from people with critical skills, or limit numbers. However, refusal should be consistent and not discriminatory. Disclaimer: This information is for general guidance only and does not constitute legal advice. Employment law is complex and changes frequently. For specific situations, consult ACAS, a qualified employment lawyer, or HR professional.