Voluntary Redundancy: What to Consider

What is voluntary redundancy?

Voluntary redundancy (VR) is when an employer asks for volunteers to leave rather than selecting people compulsorily. You choose to put yourself forward for redundancy. The terms are typically the same as compulsory redundancy — statutory redundancy pay plus any notice or PILON — but sometimes employers offer enhanced packages to encourage take-up.

The key difference from compulsory redundancy is that you opt in rather than being selected. This gives you more control, but it also means the decision is yours — which can make it harder to assess objectively.

How the process works

1. Your employer announces the scheme — typically specifying a deadline to apply, a selection window, and any criteria (e.g. certain roles only)
2. You express interest — usually in writing, by the deadline set
3. Consultation takes place — even for VR, a consultation meeting is required by law
4. Your employer accepts or declines — they do not have to accept every volunteer, particularly if there are business reasons to keep certain people
5. Terms are confirmed — in writing, including redundancy pay, notice, and any enhanced elements
6. Settlement agreement is signed — VR typically involves a settlement agreement, which you should take legal advice on before signing

Key questions before you apply

Before putting yourself forward for voluntary redundancy, make sure you have honest answers to these questions:

• Can you afford to be unemployed? — redundancy pay is a one-time payment. Calculate how long it will sustain you, and whether you have other income or savings to fall back on
• Will you get another job? — your industry, age, skills, and the local job market all affect how long finding new work might take
• Is your employer offering enhanced terms? — statutory redundancy pay is the minimum. Some employers top this up — find out what is on the table before committing
• What is the job market like in your field? — if your sector is contracting, voluntary redundancy may lead to prolonged unemployment
• Do you have mortgage or loan commitments? — these become critical if your job search takes longer than expected
• Are you in good health and energy? — a job search is hard work. Are you ready for it?

Enhanced packages — what to look for

Some employers offer more than statutory redundancy to encourage voluntary take-up. Common enhancements include:

• Additional weeks' pay — e.g. an extra 2 weeks per year of service on top of statutory
• Outplacement support — career coaching, CV writing, interview training
• Private medical insurance — for a limited period after departure
• Company car or travel loan — for a transitional period
• Waiver of post-termination restrictions — particularly useful if you plan to work for a competitor

Always negotiate. If you have specialist skills, are difficult to replace, or are in a senior role, you may be able to negotiate better terms than the standard VR package. Calculate your statutory redundancy entitlement first so you know your baseline.

Tax considerations

The first £30,000 of your statutory redundancy pay is tax-free. Any amount above that is treated as earnings and subject to Income Tax and National Insurance. Enhanced payments above the statutory minimum are fully taxable.

If you are being offered an enhanced package, part of it may exceed the statutory minimum and therefore be taxable. Your employer should provide a breakdown showing which elements are tax-free and which are taxable. If they do not, ask.

What to do before signing a settlement agreement

Signing a settlement agreement generally means you waive your right to bring tribunal claims against your employer. Before you sign:

• Get a copy of the full agreement — take it away and read it properly before signing
• Take legal advice — most settlement agreements require you to have independent legal advice. Many solicitors offer free initial consultations for this
• Check the numbers — use our calculator to confirm the statutory element is correct
• Confirm what you are waiving — the agreement should specify exactly which claims you are giving up
• Negotiate — you do not have to accept the first offer. If you have leverage (specialist skills, industry knowledge, relationships with key clients), use it