Pros And Cons Of Taking Voluntary Redundancy

30 May 2023 | Finance, General

Is it worth taking voluntary redundancy?

Voluntary redundancy can be a viable option for individuals considering a career change when their company is contemplating downsizing or facing challenges.

This approach entails employees willingly choosing to leave their positions, often enticed by financial incentives offered by their employers.

Opting for voluntary redundancy can prove advantageous for both the company and the employee involved. It fosters a mutually beneficial separation marked by goodwill, while providing the employee with additional time to make financial preparations for the forthcoming job loss.

Nevertheless, it is crucial for individuals to thoroughly evaluate their personal and professional circumstances, consider their rights, and explore alternative options before committing to voluntary redundancy.

What happens if I take voluntary redundancy?

Choosing voluntary redundancy can be an appealing option, as it often results in a lump-sum payout that exceeds the mandatory redundancy payment stipulated in your employment contract.

However, it is crucial to carefully assess your financial situation before making a decision.

Begin by determining the precise amount your employer is offering you.

This settlement is typically based on factors such as your age, current salary, and length of service in your role. It is likely to surpass the statutory redundancy pay you would receive by law.

What happens if I take voluntary redundancy?

Additionally, it is important to investigate whether you have payment protection insurance on your loan, mortgage, credit card, or short-term income protection insurance.

Find out if these policies provide coverage in the event of voluntary redundancy. Generally, insurance companies do not offer payouts if you choose redundancy rather than facing it involuntarily.

Consequently, you will need to continue meeting your monthly repayments, which can be a significant financial burden if you lack a stable income.

By considering these factors and assessing your financial obligations, you can make a more informed decision regarding voluntary redundancy and its potential impact on your financial well-being.

What are the advantages of voluntary redundancy?

Voluntary redundancy offers several advantages worth considering:

Opting for voluntary redundancy can provide you with a substantial sum of money. This payout gives you the opportunity to explore other possibilities, such as pursuing a different career, taking a break, or allowing yourself time to secure a new job.

The decision to accept voluntary redundancy rests entirely in your hands. You have the freedom to evaluate the situation and determine whether it aligns with your career goals and aspirations.

Additionally, there may be room for negotiation in terms of the terms and conditions of your departure, providing you with greater control over the process.

What are the advantages of voluntary redundancy

Voluntary redundancy allows you to take a step back and assess your current position. With the financial support provided by the payout, you can seize the chance to make significant changes in your life.

Whether that involves embarking on a new career path, embracing retirement, or exploring self-employment, voluntary redundancy serves as a catalyst for transformative personal growth.

Considering these benefits can assist you in making an informed decision regarding voluntary redundancy.

By weighing the potential financial gains, personal autonomy, and opportunities for self-reflection, you can determine if this option aligns with your long-term goals and aspirations.

What are the pitfalls of voluntary redundancy?

While voluntary redundancy may seem attractive, there are several drawbacks to consider:

The amount offered in voluntary redundancy packages can vary, and there is a possibility that it may not be sufficient to meet your financial needs. In such cases, you may need to negotiate for a more favorable settlement.

If you decide not to opt for voluntary redundancy and your employer fails to attract enough volunteers, you could still face involuntary redundancy later on.

Unfortunately, this may result in a less advantageous package compared to the voluntary option.

What are the pitfalls of voluntary redundancy?

Taking voluntary redundancy means entering a period of uncertainty regarding finding a new job.

It is essential to consider the potential duration it may take to secure alternative employment, as this can significantly impact your financial stability and overall career trajectory.

Considering these pitfalls is vital in making an informed decision regarding voluntary redundancy.

Assessing the potential financial implications, the risk of future redundancy, and the duration of job search can help you weigh the pros and cons effectively.

Do you get less money if you take voluntary redundancy?

No, choosing voluntary redundancy does not result in a reduction in the amount of money you are entitled to receive.

According to the Employment Rights Act 1996, voluntary redundancy is not considered a resignation but rather a form of dismissal. Therefore, your legal rights and entitlements, including redundancy pay, remain unchanged.

Employers are required to follow the same procedures and protocols for voluntary redundancy as they would for compulsory redundancy.

Do you get less money if you take voluntary redundancy?

This includes consulting with employees individually, informing them of their rights, providing details about how the redundancy will be implemented, explaining the financial compensation being offered, specifying notice periods, and addressing any relevant concerns or questions.

If your employer fails to conduct a proper consultation or denies you the opportunity to discuss the terms of your redundancy, it may be considered an unfair dismissal. It is important to ensure that your rights are respected and that you receive the appropriate compensation as mandated by law.

Therefore, taking voluntary redundancy should not result in a reduction in the amount of money you are entitled to receive, and your legal rights should be upheld throughout the process.

Is redundancy better than resignation?

Deciding between redundancy and resignation requires careful consideration of individual circumstances. While both options have their own implications, redundancy may offer certain advantages over resignation.

If you are facing challenges or being treated poorly at work, exploring alternative solutions before making a decision is crucial.

Initiating open communication with your employer, involving a trade union if applicable, raising a formal grievance, seeking mediation, or pursuing early conciliation are potential avenues to address the issues without resorting to resignation.

Finding a new job before leaving your current one can provide a smoother transition. This approach ensures continuity of income and alleviates concerns about claiming benefits.

Is redundancy better than resignation

Additionally, it avoids potential inquiries from future employers regarding the reasons for resigning without securing alternative employment.

If resignation remains the preferred option, careful financial planning is essential. Assessing your budget and determining how long you can sustain yourself before finding another job is important. It may be advisable to delay resignation if the period of financial stability is limited.

Consider the potential impact on benefits if you or your partner receive any. Ceasing work without a valid reason may lead to reduced Universal Credit or other benefits, known as a sanction. Understanding how your benefits may be affected and seeking advice from an advisor can be beneficial.

To resign effectively, adhere to certain steps. Review your employment contract or staff handbook to ascertain the notice period required.

Redundancy vs resignation

Provide written notice to your employer, specifying the duration of your notice and your last day of work. While reasons for resignation are not obligatory, documenting any employer-related issues can serve as evidence for potential legal action.

During the resignation process, confirm your entitlement to unused holiday pay and clarify if it should be taken during the notice period or compensated monetarily. Additionally, ensure you receive the correct final payslip, including any entitled bonuses or commissions.

If discrepancies arise, inform your employer and take appropriate steps to recover unpaid amounts, such as seeking legal advice if covered by insurance.

Ultimately, the decision between redundancy and resignation depends on individual circumstances, and careful consideration of options, rights, and financial implications is crucial in determining the most suitable course of action.

What are the 5 fair reasons for redundancy?

Fair reasons for selecting employees for redundancy must be genuine and legitimate. Here are five commonly accepted criteria:

Employers can consider an employee’s attendance and punctuality records as part of the selection process, but care must be taken to avoid discrimination against disabled employees.

The skills, qualifications, and experience of employees can be relevant factors in determining redundancy, but they should not be the sole basis for selection.

Assessing an employee’s performance and productivity over time can be considered when making redundancy decisions. It’s important to rely on objective performance measures and documented evidence.

What are the 5 fair reasons for redundancy

Employers may take into account an employee’s disciplinary records when deciding on redundancy. Fair and consistent disciplinary processes should be followed.

While the length of service with an employer can be a factor in redundancy, it should not be the sole determinant. Giving preference solely based on length of service, such as through a “last in, first out” policy, can potentially constitute age discrimination.

Employers must ensure fairness, objectivity, and consistency in their selection process. Written evidence, such as sickness records, performance reports, and disciplinary records, should be used to support decisions.

It is recommended to have at least two individuals involved in evaluating each employee against the selection criteria, with a good understanding of their work and performance.

Can I be replaced if I take voluntary redundancy?

If you choose to take voluntary redundancy, it is possible for your employer to hire someone else, even at a lower pay rate, to perform the same job you previously held. However, there are certain considerations to keep in mind.

Ideally, before hiring a new person, your employer should have offered you the opportunity to continue in the role or explore alternative employment within the organization.

If they fail to provide such options and hire someone new without considering you, it may give rise to a potential claim for unfair dismissal. It is important to note that this situation may vary depending on the specific circumstances and employment laws of your jurisdiction.

Consulting with an employment advisor or seeking legal advice would be beneficial to assess your rights and explore potential remedies if you believe you have been unfairly treated after taking voluntary redundancy.


  • Danielle Stone

    She has been writing professionally for 8 years, with articles published in various print and online publications. She is an avid researcher and strives to bring her readers the most up-to-date information and insights on the topics she covers. Danielle is also an expert on home renovation, interior design and construction, and she loves helping homeowners turn their dreams into realities. When she’s not writing or editing, Danielle enjoys spending time with her family, gardening and exploring nature.

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