Voluntary redundancy is when a person is persuaded to give up their job voluntarily, usually because of a large financial payout. When a company needs to cut its running costs and does not want to be seen to lay people off or to forcibly make them redundant, they may try to persuade certain workers to give up their posts voluntarily in exchange for a sum of money.
How It Works
When a company wants to cut back on its workforce it often finds it harder to make long-term employees redundant, i.e. do away with their particular roles in the organisation. When it comes to long-term employees it can be harder to make them redundant. The company may offer a larger than usual redundancy payment to long-term employees in an attempt to get these people to leave voluntarily.
The recent global financial crisis has meant that businesses in the UK and in the rest of the world have had to cut their costs. Reducing staff costs and the number of people that a company employs, is one of the ways in which a company might save money. Redundancies often affect the morale of the whole workforce and, in attempts to avoid this, company executives may offer lump sum payouts to some employees if they volunteer to give up their job or take voluntary redundancy. If the company wants to allay employees' fears that they might be made redundant, the company may pick older employees to see if they will take early retirement.
Getting someone to take voluntary redundancy can be expensive for a company, but in the long run it is better for the morale of the workforce and cheaper than making a large number of employees take forced redundancy. It is up to the employer which members of staff might be targeted for voluntary redundancy. When companies encourage voluntary redundancies, other employees are less likely to worry about their own jobs. A person who takes voluntary redundancy may find it difficult to get another job in the future.
If a company offers voluntary redundancy to a number of employees this could affect the remainder of the workforce. The money that an employer spends on voluntary redundancy will seriously dent their already dwindling profit margins and might have done more good if the money was spent on the future development of the business. In the past, employers have found that redundancies, even voluntary redundancies may have a deleterious effect on their business.
Current assessments of the global financial situation are not good and it could mean that in the future there will be more redundancies, both forced and voluntary.