Understanding Voluntary Redundancy: What UK Employers Need to Know

What is voluntary redundancy?

Voluntary redundancy is where an employer chooses to invite employees to volunteer for redundancy before embarking on a formal redundancy consultation process that is likely to result in compulsory redundancies.

There is no requirement for employers to offer voluntary redundancy, but it is good practice to consider this as well as looking at other alternatives to compulsory redundancy such as a cutting back on recruitment and reducing the use of agency workers or contractors.

Applications for voluntary redundancy

It is advisable, when inviting volunteers for redundancy, for an employer to make it clear that it reserves the right to reject applications for redundancy.  This is important to ensure that you retain certain employees or certain skills in the workforce but also so that you can manage the situation if you get more volunteers than the number of redundancies you propose making. 

Dismissal or termination by consent?

Where an employee volunteers for redundancy in response to an employer’s invitation, the employee is not agreeing to resign or agreeing to leave by mutual agreement.   The employee is volunteering to be dismissed by their employer by reason of redundancy.   If the employer accepts the volunteer’s application to be made redundant, this will be a dismissal by reason of redundancy and the employee will be entitled to receive a statutory redundancy payment. 

Withdrawal of applications

If you accept an application for redundancy but the employee subsequently changes their mind and asks to withdraw the application, you need to consider the request carefully.    If you refuse an employee’s request to withdraw their application for voluntary redundancy and their employment ends, this is still a dismissal which means that the employee can still bring a claim for unfair dismissal if they feel that they have been treated unfairly.

Where an employee brings an unfair dismissal claim in such a situation, the Employment Tribunal will consider whether, in the circumstances (including the size and administrative resources of the employer) the employer acted reasonably or unreasonably in dismissing the employee by reason of redundancy. 

In such cases, the Employment Tribunal will assess the following factors:

1. The clarity and transparency of the voluntary redundancy scheme;
2. What employees were told about the voluntary redundancy scheme;
3. The date and timing of the employee’s withdrawal of their voluntary redundancy application;
4. The effect their withdrawal would have on the whole redundancy process; and
5. Overall whether the employer acted fairly.

The key, as illustrated by the above factors, is to have a clear voluntary redundancy scheme where you set out to employees what will happen if their application is successful, give plenty of time for employees to reconsider their application but at the same time give a definitive end date for withdrawing from the scheme, explaining that after this date, no withdrawals will be accepted.    By clearly communicating the terms of the scheme, giving a fair opportunity for volunteers to change their minds and setting a clear date for acceptance, you will be in a better position to justifiably refuse any late requests to withdraw from the scheme and to defend any subsequent claim of unfair dismissal. 

This does not mean that employers should adopt a blanket refusal to late requests by employees to withdraw their applications.    There may be circumstances in which you will need to consider whether proceeding to make the employee redundant is the fair thing to do.  An example of such a situation may be if an employee’s personal situation suddenly changes meaning that it is no longer financially viable for them to volunteer for redundancy.   It is therefore advisable to make reasonable enquiries as to the reasons for an employee’s late request to withdraw before making a final decision.    

Settlement Agreements and voluntary redundancy schemes

It is quite common, where an employer is offering enhanced redundancy terms as part of a voluntary redundancy scheme, for the employer to require volunteers to sign a settlement agreement.   This is an agreement to compromise an employee’s contractual and statutory claims on termination of employment.  In order for the agreement to validly waive any employment claims, the employee must obtain independent legal advice on the terms and effect of the agreement from a solicitor or other suitably qualified legal practitioner.   

Although it is not essential to require an employee to enter into such agreement where they have volunteered for redundancy, it is advisable since it means that the employee will not be able to bring a claim for unfair dismissal or other employment claim if they subsequently decide that they made the wrong decision. 

Advice and assistance on redundancies

Making cutbacks is hard, especially if it involves having to let go of trusted and loyal staff.  We understand this and are here to give advice and help businesses navigate through this difficult process.   If you would like help in drawing up a voluntary redundancy scheme or advice on carrying out a fair redundancy selection and consultation process, please get in touch with us. 

You can find more about redundancy dismissals and processes here: Redundancy