If your company needs to restructure or develop its business in a different way, you may need to evaluate the current and future requirements of job roles and skills necessary to achieve those aims. Often, such decisions will require a reduction in head count and/or change in role or associated tasks. Many business leaders think that compulsory redundancy is the only option. However, if the business continues to operate, it may be possible to consider whether voluntary redundancy could be offered as an alternative method of rationalising the business. It is important for business leaders to note that it is a job role or post that becomes redundant – redundancy is not person-specific.

Do you know the difference between voluntary and compulsory redundancy?

Voluntary redundancy

Voluntary redundancy normally offers a greater financial payment to employees; this approach is to incentivise staff to apply for voluntary redundancy. The benefit of offering voluntary redundancy is that it is more likely to create a positive work culture. Ideally, this approach allows staff that are discontented, or those considering an exit from the business, to do so in a positive, dignified way.

Voluntary redundancy can project a positive, caring image for the company and reduce brand damage or concern. When employees leave of their own free will, motivation and morale of the team can remain high, if the rebalancing of roles and skills are handled in a timely manner. Do you and your managers know what knowledge and skills are required by each job role? If not, a training and skills matrix should be created with your HR Partner. This approach allows the business to be proactive and agile, changing shape in accordance with the needs of the world and customer.

Voluntary redundancy is often more transparent, leaders do not need to create a selection process, however, understanding the knowledge and skills required to future proof the business will assist with decision making when agreeing or not agreeing to applications for voluntary redundancy.

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What happens if no one volunteers to be made redundant?

In this case, the company would need to move into a compulsory redundancy situation.

What happens if all my best people want to be made redundant?

It is often the best people who come forward; this is because they are confident that they can find other employment. The employer will need to weigh up the skills required in the business and decide if the business is able to agree to the redundancy.

If employees ask for voluntary redundancy, do I have to agree to it?

It is not mandatory that the business agrees to a request to be made redundant; however, communication as to why an application is declined or accepted is crucial, especially when trying to keep the employee and other staff motivated and engaged. Maintaining a record of decisions made is important and this will ensure that an audit trail is created, and that any discrimination is identified. Usually, senior or long-term employees are offered the opportunity for voluntary redundancy, although it is possible for other employees to apply if they want to be considered.

Compulsory redundancy

Compulsory redundancy is based on a statutory payment established via a calculation set by the UK Government. To qualify for redundancy, employees need to have been employed for at least two years. The calculation is based on length of service, age and average weekly wage. Communication, the need for the redundancy, sharing the selection criteria / matrix (if applicable) to be used to select those being redundant and time scales are all important factors in engaging staff with the process. Leaders must consult with staff and identify the roles at risk.

To find out more about the process and cost of redundancy, contact a member of the MAD-HR team, who will work with you to evaluate the risks associated with a voluntary or compulsory redundancy approach and support you every step of the way.