Redundancies have been big news recently, with many large organisations choosing to lower staff numbers to reduce their costs in harsh economic times. With voluntary redundancies continuing to be a method to avoid compulsory cuts, we take a look at how these decisions may benefit or disadvantage businesses.

Advantages

Ensuring a fair redundancy

As a redundancy is a dismissal, the provisions of the Employment Rights Act 1996 continue to apply to these decisions. As such, employers need to ensure that they are fairly dismissing employees for a potentially fair reason, ie redundancy, that they have followed a fair procedure and the dismissal is a reasonable response in all the circumstances.

In order to ensure this is the case, employers are required to examine all available alternatives to making redundancies. These alternatives cover practical areas in relation to the workforce, such as banning paid overtime or placing employees on lay-off or short-time working; implementing these may avoid the need to conduct a redundancy process. One such alternative which provides real benefits to the employer in terms of avoiding the redundancy situation is to offer voluntary redundancies. Considering whether to make such an offer, and doing so where this is appropriate, will help a business evidence that it has followed a fair procedure during its redundancy process. Making offers of voluntary redundancy in writing, and requiring volunteers to apply in writing, will also produce useful documentary evidence if needed.

Avoiding compulsory redundancies

As the name itself suggests, using voluntary redundancies where sufficient members of staff apply can avoid the need to make compulsory redundancies, whether wholly or in smaller numbers than originally envisaged.

When a redundancy process is necessary to undertake, there may be employees who are considering their retirement, a new venture or to change jobs. Offering voluntary redundancy provides the opportunity to step away from the organisation under positive terms, and can be very helpful in preventing other employees from being selected for compulsory redundancy. Some redundancies may still be necessary however where, for example, insufficient numbers have volunteered or applications are rejected.

Preventing a dip in morale

Redundancies are often a morale killer in workplaces — not only are employees at risk of losing their job but, in most cases, the reason for this situation is entirely out of their hands.

Compulsory redundancies can have a significant negative effect on the morale and engagement of employees who continue to carry out their role while being involved in redundancy consultations which could result in them being dismissed. Undertaking selection processes can make employees feel as though they are being pitted against one another, while productivity and quality can slip as employees’ focus goes elsewhere. Using voluntary redundancies to avoid the need for a full formal process can prevent this negative impact occurring.

Choosing whose application is accepted

When offering voluntary redundancy, it will be key to remind employees that anyone who submits an application will not automatically be made redundant and, instead, it will be for the employer to either accept or decline the application.

While you may have employees who volunteer to be made redundant who you never expected to, this decision is based on objective business reasons, ie who will be needed to help the business succeed going forwards. In some cases, this may be a different consideration to the scoring process whereby employees are selected for compulsory redundancy. After all, a scoring exercise will generally examine objective factors that have already occurred, such as attendance and performance, but may not provide the opportunity to consider which employees’ skills are needed to work on a new project or help secure a new tender. Therefore, using a voluntary redundancy exercise may help you keep those employees who are crucial to the future of the business, so long as this choice remains objective.

Quicker process

As the option to volunteer for redundancy is usually offered at the start of the redundancy process, in order to be an alternative to a compulsory redundancy, where sufficient volunteers are in place there may not be the need to go through the formal redundancy procedure. With consultation processes needed, and collective consultation procedures being carried out with representatives where higher numbers of redundancies are proposed, this can often be a lengthy process which becomes extended where employees submit proposals that need sufficient consideration.

Even though this allows a speedier resolution, employers will still be required to carry out a full and fair process when undertaking voluntary redundancies. Simply accepting the application is likely to result in an unfair dismissal process. Instead, a consultation meeting should be held with the applicants informing them what voluntary redundancy will mean for them, and ensuring they are fully on board with the process. As this meeting is likely to result in the dismissal of those employees whose applications will be accepted, they will also have a statutory right to be accompanied at this meeting.

Disadvantages

Higher costs

In most cases, voluntary redundancy procedures will be carried out with applicants receiving a lump sum, ex gratia or discretionary payment in order to make this an attractive option for them. With this being the case, organisations may find that the costs of voluntary redundancies are higher than if compulsory redundancies were carried out and only statutory redundancy payments are received. On the other hand, employers who do not offer enhanced payments for voluntary redundancies may find that they have fewer numbers of applicants as there is no benefit to this opportunity. Organisations will have to weigh up these higher costs against the potential costs of carrying out a full compulsory redundancy procedure.

Declining applications

Although the advantage of voluntary redundancies is that it is up to the individual to submit their application, the end decision remains with the employer based on whether it accepts these or not.

Where applications for voluntary redundancies are declined, organisations may experience a detrimental impact as a result. After all, most volunteers will have a personal or professional reason for making the application, and they might be signalling their intent to no longer work within the business. Keeping them within the business could lead to a lack of engagement or lack of productivity as they are disgruntled with the decision and may, in some cases, continue to seek opportunities elsewhere.

The opportunity for risks

The redundancy procedure itself is well recognised as presenting many opportunities for mistakes, whether by unfair selection, a failure to consult appropriately and/or an unfair dismissal result.

The application, and acceptance, process for voluntary redundancies does not escape the likelihood of unfair or unlawful treatment. For example, managers may find that their decision to accept an application, or not, may be challenged on the basis of being discriminatory where an applicant feels that this decision was linked to their protected characteristics. To avoid this occurring, managers should fully explain how the choice will be made and why a particular decision was reached. Additionally, employers should ensure their managers understand how to undertake this procedure and that they are provided with sufficient support.

Last reviewed 7 August 2019