Voluntary Redundancy – How to Make it Work

By Deborah Manktelow
16 Feb 2022

If your company undergoes restructuring or even closing one part of the business, you might have to make people redundant. By using voluntary redundancy, you can give them an incentive to offer themselves up for it. However, this doesn’t come without risks.

Hard times don’t often happen without notice. Keeping your options open and preparing ahead will give you an edge to better deal with such challenges. Learn how to follow the UK employment law in case of voluntary redundancy, and call us for free 24/7 HR advice, on 01455 858 132.

In this article, we’ll discuss the voluntary redundancy rules you need to apply in order to achieve a positive outcome. 

What is voluntary redundancy?

It is an alternative to compulsory redundancy, where you offer a package or benefits to employees who volunteer to resign. By choosing this path, you aim to incentivise them to leave the business of their own accord.

Before they trigger voluntary redundancy in a UK-based workplace, we advise employers like you to consider these questions:

  1. What will make an attractive enough offer that some employees will decide to take it and leave their jobs?
  2. What if not enough people step forward to become redundant in exchange for the package offered?
  3. What can you do to minimise the risk of staff members feeling forced to resign?

To answer question one, knowing your workforce is key. The employees’ personal circumstances will influence what they find attractive enough to step forward for termination of employment. While redundancy pay will always matter, you might find that other incentives work too. Payment in lieu, flexible working or a part time schedule during their notice period can give your staff the support they require to move forward.

Looking at question two, if not enough people volunteer, compulsory redundancy remains the next available option. Ensure you inform your staff members of the steps involved and avoid suggesting blame for them not stepping forward.  

Regarding question three, all you need to do is follow the correct process, which we will detail next.

Voluntary redundancy rules

As an employer, you need to understand and follow the necessary steps for voluntary redundancy by UK law. The voluntary redundancy procedure mirrors the compulsory redundancy process, as highlighted below:

  • Ensure there are no suitable alternatives to redundancy. Prepare an explanation that will clearly show why no other option will help in the given situation.
  • Communicate, both verbally and in writing, that the company needs to make staff redundant. Ask for volunteers to come forward.
  • Consider if you want to offer an enhanced package that can include increased pay and other benefits.
  • Hold at least one collective consultation meeting, and later individual meetings with the people who volunteer to end their employment.
  • Send a redundancy notice letter to staff who chose to become redundant. Explain the steps that will follow and the package they will receive.

What could you include in a package to incentivise your staff to volunteer? Increased pay, a part time schedule to give them time to look for work, and increased notice all make for good options.

Voluntary Redundancy UK

Once you receive an expression of interest for voluntary redundancy from different employees, you do not need to approve them all. You will still consider whom of the volunteers to let go, weighing the impact of their role and experience.  

Employees do not have a legal entitlement to a voluntary redundancy appeal. If an employee whom you refused voluntary redundancy feels you did not treat the fairly, offer a one-to-one meeting to discuss options.

Voluntary redundancy notice period

Employees who have been with the company for at least two years will be entitled to statutory notice period and pay. However, think of why they would offer themselves to terminate their employment with you. If you give them something extra than they would receive when chosen by the company, the likelihood of them volunteering increases.

Instead of offering increased pay, you could consider an increase in notice given. The legal entitlements stand as:

  • One week’s notice if the employee has been with you for longer than one month, but less than two years
  • For two years or more, an additional one week (up to 12 weeks) for every further year
  • 12 weeks for staff members with 12 years or more continuous service

Remember to also check their employment contract and make sure you don’t breach any terms. If you do, you risk ending up with a wrongful dismissal claim. You cannot offer a notice period for voluntary redundancy shorter than specified in their terms of employment.

It is worth noticing that, by law, there isn’t an early voluntary redundancy pay option. Staff members who worked for the company for less than two years can take it up, but they will not qualify for statutory payment.

Weigh voluntary redundancy benefits against risks

As with any staffing related decision, this one too comes with pros and cons. Decide if it works for your business only after you compare and see a positive balance.

By resorting to this option to reduce or restructure your workforce, you can:

  • Reduce long term operating costs

When you restructure and eliminate job roles that do not contribute to growth, you can shorten the process by offering it.

  • Avoid making the process compulsory

Voluntary redundancy can shift the focus from you having to let staff go to them choosing to move on.

  • Increase staff morale through use of pay and benefits package

Suggesting a package for those stepping forward looks more consultative than just forcing staff to leave the company.

However, you will face the following risks:

  • Increasing short term costs

This will happen when you offer a voluntary redundancy package to incentivise staff. Make sure it doesn’t outweigh what you gain financially by reducing your workforce.

  • Losing skilled employees

Yes, you can refuse to make certain members of staff redundant. However, you risk upsetting them, particularly if they are looking for their next career challenge.

  • Facing a discrimination claim

Just like the previous example, this will make employees unhappy with a refusal. They might consider whether you refused them because of a protected characteristic. Explain and be ready to offer alternatives if they stay.

  • Loss of morale and motivation

Those you did not select might feel deflated, but not only them. Remaining staff might think themselves under pressure to prove their worth. If this is paired up with increased workload, you might see them resign anyway and leave your business understaffed.

Voluntary redundancy vs compulsory redundancy

Comparing the two options will help you measure which one is preferrable in the context your company is facing.

The fundamental difference between them relates to who makes the decision. The employees who volunteer can also decline your offer if unhappy with the package and notice period. They retain more power to negotiate than when you just choose to make them redundant.

At the same time, you retain the right to accept or refuse applications.

Voluntary Redundancy Rules

In cases of compulsory redundancy, the decision process stays entirely with you. By following due process, you will reduce the risks of unfair dismissal or discrimination claims. However, this can cause low morale as even remaining staff might fear for their future within the company.

Due to their personal circumstances, some employees will be more likely to welcome the offer. We have seen employees ask about taking voluntary redundancy whilst on maternity leave. Not only is this possible, but it could also offer them more time to find a suitable job. They will remain entitled to their maternity pay, which can help through the process.

Our advisors have also been asked about voluntary redundancy and benefits. ACAS highlights that receiving a package that includes pay might affect the employee’s ability to claim benefits or their mortgage. Be prepared for individuals to discuss this aspect when they negotiate taking up redundancy with you.

Get free 24/7 HR advice

How do you make sure voluntary redundancy is the right option for your business moving forward? And more so, how do you follow the necessary process without omissions or mistakes that could lead to tribunal claims?

Our experienced advisors will guide you through the process, including all the paperwork you need to cover. Call us today on 01455 858 132.

About the Author

Headshot of Deborah Mantkelow

Deborah Manktelow is a CIPD Qualified HR professional with over 7 years’ experience in generalist HR management working within the Construction Industry.

Working for a National provider of Insulation provided Deborah with the opportunity to strategically support Operations across the UK, supporting HR functions and the wider business.

Deborah is Croner’s Advice Manager, taking responsibility for overseeing the provision of advice to all Croner clients, bringing together our Corporate, Simplify and Association service provisions.

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