Legal Q&A: Voluntary redundancy

Large scale redundancy exercises bring challenges of many kinds, but employers often find that a request for volunteers is welcomed by the workforce and less damaging to the employer’s reputation than might otherwise be the case, particularly if the desired result can be achieved through agreement.

The Government’s Comprehensive Spending Review in October 2010 forecast significant budget cuts, the knock-on effect being the loss of more than half a million jobs in the next five years. Given this environment, employers need to be aware of the potential pitfalls of the voluntary redundancy process and know how to take steps to avoid them.

Q When is a volunteer not a volunteer?

Sometimes the possibility of voluntary redundancy may be raised by an employee, or volunteers may be sought by an employer, long before any formal redundancy process takes place, and before the employer decides that it needs to dismiss particular categories or numbers of staff. An application for voluntary redundancy that is accepted in this context could be a resignation on the part of the employee or a true mutual agreement to terminate the contract; in other words, not a dismissal.

On the other hand, if volunteers are requested as part of a redundancy process, those who agree to go are likely to be treated in law as dismissals. As a result, statutory obligations are relevant, for example relating to consultation, statutory redundancy payments and notice periods, if applicable.

Q What steps should employers include in a voluntary redundancy process?

• Employers should make it clear when inviting volunteers that they reserve the right not to accept all applications. If the employer is obliged to accept applications, voluntary redundancy can result in the significant loss of skills and experience.
• Don’t ignore consultation. Collective consultation is required when 20 or more employees at one workplace are at risk of being made redundant within 90 days. Volunteers will usually count in the numbers of proposed dismissals. Individual consultation must always be carried out with affected employees, even where the decision appears obvious or when collective consultation is also taking place. Volunteering can usually be built into this part of the process.
• Those whose applications for release are not agreed should be told why and reassured that they are being retained for positive reasons.
• The employer should usually hold a meeting with volunteers to tie up loose ends and to discuss whether or not the employee will be required to work his or her notice period.

What problems can arise with voluntary redundancy?

• Some employees get cold feet after volunteering – employers should ensure that all communications set out clear dates for agreement and departure so that the point at which the redundancy process becomes finalised is certain.
• There is a risk of discrimination allegations by selected or non-selected employees. Employers should ensure that clear records are kept of all consultations and that any decisions are objectively justifiable.
• An employee who is selected for redundancy, but who could have been saved if the employer had accepted a volunteer, could challenge his or her dismissal. Employers should think carefully about the selection criteria for volunteers if conducting the two stages of the process together.
• There is a risk of claims for protective awards. Employers should ensure that they count the volunteers in the number of proposed dismissals and meet collective consultation requirements.
• Voluntary redundancy exercises may be less successful where an employer does not have the ability to offer enhanced settlement terms.
• Where large numbers of job losses are involved, it is unusual to be able to complete a whole exercise by securing volunteers.

By following a carefully considered process, many of these issues can be avoided. However, if problems do arise, appropriate advice should be sought from a trusted legal advisor on how best to proceed.

Karen Waddell, Associate, and Jenna McCosh, Trainee Solicitor, Brodies LLP

This article was originally published on 24 January 2011. It was updated on 23 October 2015 by Ashok Kanani, employment law editor.