Dealing with redundancy is never easy – even when it’s voluntary…
If your employer has offered you voluntary redundancy, you might be tempted by the financial incentive. But before you make any big decisions, it’s vital to be as informed as possible about the process and what it means for you.
We’ve already covered how to deal with redundancy, but this guide will walk you through your rights if you’re offered voluntary redundancy, helping you make the best choice for your situation:
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.
This is a way for a company to reduce its workforce without having to go through a compulsory redundancy process.
It’s often offered to more senior or long-term employees first, but any employee can usually put themselves forward for consideration.
Is voluntary redundancy compulsory?
No. As the name suggests, it is taken voluntarily by the employee.
Because it’s voluntary, you have no obligation to accept the terms your employer offers.
However, the financial package is often more generous than what you would get with compulsory redundancy, which is why it can be an attractive option.
Are my rights different because I left voluntarily?
No, your legal rights are the same as those selected for compulsory redundancy.
Voluntary redundancy is still classed as a dismissal under the Employment Rights Act 1996, not a resignation. This is a crucial point, as it means you don’t lose your right to redundancy pay and other legal protections.
Employers must follow the same protocol as any other redundancy. If they don’t, it could be considered an unfair dismissal.
What is the voluntary redundancy process?
Even though it’s voluntary, your employer must still follow a fair process that aligns with employment law. This means they should:
- Consult with employees individually and collectively (if 20 or more employees are being made redundant).
- Provide clear information on how the redundancy will be implemented, the financial compensation on offer, and notice periods.
- Answer any questions you have about the terms.
Just because you volunteer doesn’t guarantee you’ll be selected, and your employer will choose from the pool of volunteers based on their business needs.
If you are selected, make sure you get a formal letter from your employer confirming you’ve been made redundant. This is important evidence if any issues arise later.
Good reasons for voluntary redundancy
Voluntary redundancy can be a great opportunity for some. Good reasons for taking it might include:
- You were already thinking about a career change.
- The financial payout gives you the freedom to travel or study.
- You’re nearing retirement age (voluntary redundancy over 55 is common).
- You’re confident you can find another job quickly.
Always weigh the pros and cons carefully. A lump sum is tempting, but it won’t last forever.
Voluntary redundancy pay
If you’ve been with your employer for two years or more, you’re entitled to statutory redundancy pay. The voluntary redundancy payment is often more than the legal minimum, but it can’t be less.
How is statutory redundancy pay calculated?
The minimum you’re entitled to is based on your age, weekly pay (capped at £700 as of April 2024), and length of service (capped at 20 years).
The calculation is:
- Aged 41 or over: 1.5 weeks’ pay for each full year of service.
- Aged 22 to 40: 1 week’s pay for each full year of service.
- Under 22: 0.5 weeks’ pay for each full year of service.
You can get a specific calculation using the gov.uk’s online calculator. Your employer should also give you a written statement explaining how your pay was calculated.
Importantly, the first £30,000 of your redundancy payout is usually tax-free.
Voluntary redundancy notice period
The length of your notice period will depend on how long you’ve been with the company. The statutory minimum notice period is:
- 1 month to 2 years’ service: 1 week’s notice.
- 2 to 12 years’ service: 1 week’s notice for each year of service.
- 12+ years’ service: 12 weeks’ notice.
Check your employment contract, as it might specify a longer notice period. You might also be able to negotiate your notice period as part of your voluntary redundancy settlement agreement, for example by agreeing to ‘payment in lieu of notice’ (PILON).
If you’ve been employed for two years or more, you’re also entitled to a reasonable amount of paid time off to look for a new job or arrange training.
Voluntary redundancy rules
The main rules for employers are to ensure the process is fair and transparent. This means:
- A genuine business reason for the redundancies.
- A fair selection process, even for volunteers.
- Proper consultation with affected staff.
If an employer doesn’t follow these rules, you may have grounds for an unfair dismissal claim. For example, if you feel you were pressured into volunteering or your application for voluntary redundancy was refused for discriminatory reasons, you should seek legal advice.
How to: Find a company’s equality and diversity policy
Negotiating voluntary redundancy
One of the biggest advantages of voluntary redundancy is that the terms are often negotiable. The initial offer your employer makes is just that – an offer. You don’t have to accept it.
You might be able to negotiate a better financial package, a longer notice period, or other benefits like keeping a company car or laptop. Do your research, understand what you’re entitled to, and don’t be afraid to ask for more.
This is often done through a ‘voluntary redundancy settlement agreement’, a legally binding contract setting out the final terms.
Financial support options
After your redundancy, you might be eligible for certain government benefits, such as Universal Credit. Eligibility depends on your circumstances, including your household savings (your redundancy pay will be counted as savings) and whether you or a partner are working.
It’s also a good idea to check if any loans or mortgages you have include payment protection insurance. However, be aware that many policies exclude voluntary redundancy.
For more information about what support is available, visit the gov.uk website or get in touch with an organisation like Citizens Advice.
Frequently asked questions
Here are some quick answers to common questions about voluntary redundancy.
What is voluntary severance?
Voluntary severance is another term for voluntary redundancy. The voluntary severance meaning is essentially the same: an employee volunteers to end their employment in exchange for a financial package. Public sector organisations, like the civil service or local councils, often use the term ‘voluntary severance scheme’.
What happens if my request for voluntary redundancy is refused?
If your application for voluntary redundancy is refused, you simply continue in your role. Your employer is not obligated to accept your request. If the company still needs to make redundancies, they will then move to a compulsory redundancy process, and you may or may not be selected.
What is the NHS voluntary redundancy scheme?
The NHS voluntary redundancy scheme is a programme used to manage workforce changes. Like other public sector schemes, it’s often referred to as a ‘voluntary severance scheme’. The terms of the NHS voluntary redundancy scheme can vary, but it generally offers a financial package to employees who volunteer to leave. Details will be specific to the NHS Trust and the particular redundancy situation.
If I take voluntary redundancy, can I sign on to receive benefits like Universal Credit?
Yes, you can claim benefits after taking voluntary redundancy. However, your eligibility will depend on your household income and savings. Your redundancy payment will be treated as savings, so if it’s over £16,000, you likely won’t be eligible for Universal Credit until your savings drop below this amount.
Final thoughts
Voluntary redundancy can feel like a lifeline or a leap into the unknown. Before you decide, create a realistic budget to understand how long the payout will last and how feasible it is for your situation.
If you’ve considered all the angles and decided it’s the right move, you can inform your employer and start planning for what comes next.
Once you’re ready to start looking for a new opportunity, our redundancy cover letter template and redundancy CV template is a great place to start…
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*Please note, the information outlined above is intended for general guidance purposes only, and is subject to change at any time. For more detailed information about your rights around voluntary redundancy, please visit: https://www.gov.uk/redundant-your-rights
