Dealing with redundancy is never easy – even if it’s voluntary…
Even if your employer has ultimately left the decision up to you, making sure you’re as well informed about the process as possible will go a long way to helping you make the right decision.
We’ve already covered how to deal with redundancy, but here are a few things you need to know should you be offered redundancy voluntarily:
What is voluntary redundancy?
Voluntary redundancy is when an employer asks a member of staff to agree to terminate their contract, in return for a financial incentive.
It is usually offered to more senior or long-term employees, although it is possible for other employees to apply if they want to be considered.
Is voluntary redundancy compulsory?
No. As the name suggests, it is taken voluntarily by the employee.
This means there’s no obligation for you to accept the terms offered by your employer. However, they are usually more lucrative than those that come with a standard redundancy payment.
Are my rights different because I left voluntarily?
No. Your legal rights will not differ from those who have been selected for compulsory redundancy.
In fact, under the Employment Rights Act 1996, voluntary redundancy is not considered as a resignation, and is therefore still classed as dismissal.
As a result, you will not lose any right you have to redundancy pay, and employers must go through exactly the same protocol as any other redundancy.
This means an employer should:
- Consult with employees individually and inform them of their rights
- Include advice and information on how the redundancy will be implemented, the financial compensation on offer, notice periods, and any other relevant information
- Answer any questions surrounding the terms offered
If you have not been given the chance for a consultation, your redundancy could be considered as an unfair dismissal.
Why does employment law exist?
Voluntary redundancy pay
You’re entitled to statutory redundancy pay if you have been with your employer for two years or more. You should also receive a written explanation of how your employer calculated it.
The fee for voluntary redundancy is often more than the amount offered for statutory redundancy pay, and will take into account factors such as your age, salary and length of service.
The first £30,000 of your redundancy pay will also be free from tax and National Insurance payments.
As a general guideline, minimum redundancy entitlements (and, therefore, the minimum amount you can be offered as voluntary redundancy pay) based on your age are as follows:
- Half a week’s pay for each full year served (under 22 years old)
- One week’s pay for each full year served (between 22 and 41 years old)
- One and a half week’s pay for each full year served (42 years and older)
There are exceptions to this rule, such as if you are offered alternative employment which you refuse without valid reason. However, these are usually more common for those taking compulsory redundancy.
For specific information about how much redundancy pay you are entitled to, you can use gov.uk’s online calculator.
Voluntary redundancy notice period
This will largely be dependent on how long you’ve been with the company.
However, as a general guideline, the statutory redundancy notice period is:
- One week’s notice (for those employed between one month and two years)
- One week’s notice for each year (for those employed between two years and 12 years)
- 12 weeks’ notice (for those employed for a period of more than 12 years)
The numbers above are intended as a guideline only. For more specific details on your notice period, consult your contract.
You may also be entitled to reasonable time off to look for a new job. This will apply if you’ve been continuously employed for a period of more than two years. However, if you decide to take this time off, bear in mind that you will be paid at a reduced rate (up to 40% of your weekly salary).
Financial support options
After your redundancy, you may be eligible for certain state benefits including jobseeker’s allowance or income support. However, there are a number of requirements to meet in order to qualify.
For example, income-related jobseeker’s allowance will only be available if:
- Your current savings add up to less than £16,000 (including your redundancy pay)
- You work no more than 16 hours a week
- Your partner works no more than 24 hours a week
You may also entitled to other benefits, such as discounted council tax or housing benefit. For more information about what’s available to you, visit the gov.uk website.
If there’s a chance you may be out of employment for some time, it’s also recommended that you check whether any loans you have include payment protection insurance which may cover some of your outgoings.
To learn more about your financial options, speak to your bank manager or financial advisor.
How to claim Jobseeker’s Allowance
Final thoughts
Although the idea of a lump sum may seem attractive at first, it won’t last forever.
To make sure you don’t regret your decision, always set a realistic budget to put things into perspective. Not only will this help show how feasible voluntary redundancy is for your situation, it’ll also allow you to keep track of your outgoings. And, it’ll provide you with a timespan of how long you can financially go without working.
If you’ve considered all of the above and have decided that voluntary redundancy is definitely the right option for you, all that’s left to do is inform your employer that you have accepted their terms.
Once you’ve done this, it’s time to start looking for a new opportunity. For advice on how to deal with your redundancy when applying for new roles, read our redundancy cover letter template and redundancy CV template.
* Please note, the information outlined above is intended for general guidance purposes only, and is subject to change at any time. This article was first written in November 2014.
For more detailed information about your rights around voluntary redundancy, please visit: https://www.gov.uk/redundant-your-rights
