Managing voluntary redundancy in a small business

The need to make redundancies is often an upsetting and difficult time for any business. Offering voluntary redundancy can be one way to ease the situation and preserve employee relations. But what’s the process for voluntary redundancy? What steps must you take to get things right?

Offering voluntary redundancy

Offering voluntary redundancy simply means providing employees with the option to volunteer to take redundancy when the business is faced with a redundancy situation. This is often in exchange for an incentive.

You may want to consider offering voluntary redundancies as an alternative to compulsory redundancy.

The voluntary redundancy process

Many stages of a voluntary redundancy process mirror those of a compulsory redundancy process – you must ensure there are no alternatives and take care not to discriminate.

With voluntary redundancy, however, you can be selective over which applications you’ll accept, so as to protect yourself in situations where losing particular skills and experience would place the business at even further detriment.

It’s advisable to state from the outset – for example, in your redundancy policy – that you reserve the right not to accept all applications.

Here are the steps to follow in a voluntary redundancy process:

1) Ensure there are no alternatives to redundancy

As with a compulsory redundancy scenario, you must make sure that redundancy is essential and that no other solutions, such as reducing benefits or working hours, exist.

2) Offer voluntary redundancy to staff

If you’re faced with a redundancy situation, you should notify staff of the need to make redundancies in writing and ask for any volunteers to come forward.

Typically, voluntary redundancy should be offered to all staff who have roles at risk of redundancy. In some cases, you may wish to offer it to the entire company if you’re confident losing staff from other departments will resolve the initial challenges the business is facing.

To best preserve employee relations, it’s a good idea to be as transparent as possible about the business situation and how this has led to the need for redundancies.

3) Consider whether you will offer an enhanced voluntary redundancy package.

It’s not uncommon for businesses to offer enhanced payments and packages, over and above the statutory redundancy entitlement, to incentivise staff to volunteer for redundancy. If you chose to do this, make your proposition clear from the outset.

4) Take care not to discriminate

It’s always advisable to offer voluntary redundancy to all of the affected roles regardless of age or length of service, (or any other characteristic protected by equality law, such as gender or disability). Failing to do so may appear discriminatory.

If you have more volunteers than you need to make redundancies, you’ll need to be able to support your decision to select certain volunteers over others with sound business reasoning.

5) Remember to class the selected volunteer(s) as redundant

A voluntary redundancy must still be treated as a redundancy, rather than a choice to quit. This means you must make sure the employee receives redundancy pay (if eligible), and their notice period.

Reasons to refuse voluntary redundancy

What happens if someone you consider ‘business critical’ volunteers for redundancy? Can you refuse their offer?

If the employee volunteering is someone with specialist skills that would be very difficult to replace, and you have no similar resource within the organisation, then it may be possible to refuse them.

However, you would need to be able to support your refusal with sound business reasoning as to why that particular volunteer is business-critical and therefore unsuitable for redundancy.

Get HR Support

As with compulsory redundancies, transparent communication and supporting any decision with clear, objective, non-discriminatory reasoning is essential when making voluntary redundancies.

Nevertheless, you must still take extreme care throughout the process and it’s always best to seek professional advice from an HR or employment law expert to make sure you’re following the process correctly.

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