What is voluntary redundancy?

Voluntary redundancy (VR) is a financial incentive offered by an employer for an employee to leave their employment. As part of the VR process, the employee agrees to relinquish various employment rights, allowing the employer to move much more quickly than they would be able to if they followed the legal process for involuntary redundancy.

VR is often used when the employer needs to reduce its pay bill, or when it is reorganising, restructuring or relocating. Generally, the financial package on offer is much more generous than the statutory minimum or the company’s usual terms. It may include benefits such as advantageous stock, pension and tax arrangements, or continued access to company facilities and perks.

Voluntary redundancy may be made available only to selected staff members, based on a range of criteria. For instance, it may reflect a need to change the skill base, the age range or the geographical location of staff. VR terms may specifically exclude certain members of staff, for instance, graduates, or high performing individuals. Companies usually reserve the right to turn down individual applications for VR.

There is usually a finite target for the number of individuals a company wishes to lose, and a finite date by which VR must be applied for. If the company is in a hurry to make redundancies, it may issue ‘enhanced’ terms for a short period to encourage those hesitating over a decision.