Your employer has announced voluntary redundancy. You're thinking about it. Maybe you've been wanting a change anyway, or maybe the package looks decent and you'd rather go now than wait to be pushed.
But should you actually take it?
Voluntary redundancy can be a smart move, but only if you understand what you're signing up for. There are real advantages, and some serious catches that most people don't think about until it's too late.
What is voluntary redundancy?
Voluntary redundancy is when your employer invites employees to put themselves forward for redundancy, rather than selecting people. You're choosing to go, instead of being told you have to.
Your employer might do this because it's faster, cheaper, and less likely to result in legal disputes. People who volunteer tend to leave without a fight. And from a morale perspective, it feels less brutal than picking people off a list.
But here's the important bit. Just because you volunteer doesn't mean your employer has to accept you. It's entirely their decision whether to select you. If you're essential to the business or hard to replace, they might say no. The Citizens Advice guidance makes this clear.
The package is usually better
This is the main reason people consider voluntary redundancy. Employers often offer enhanced packages to attract volunteers.
Why? Because they need people to put their hands up. If nobody volunteers, they have to go through compulsory redundancy, which is slower, riskier, and more expensive. So they sweeten the deal.
Volunteers often get extras like higher redundancy pay, not having to work their notice period, or both. Some employers offer a flat bonus on top of statutory pay. Others offer a multiplier, like two or three weeks' pay per year of service instead of the statutory formula.
If you've been offered a package, compare it to what you'd get under statutory vs enhanced redundancy pay to see if it's genuinely generous or just dressed-up statutory minimum.
How is voluntary redundancy pay taxed?
Exactly the same as compulsory redundancy. There is no difference.
The first £30,000 of your termination payment is tax-free under ITEPA 2003, s.403. That covers your statutory redundancy pay and any extra goodwill payment combined.
Anything above £30,000 is taxed at your normal income tax rate. Notice pay and holiday pay are always taxed as regular earnings and sit outside the £30,000 allowance.
For a full breakdown, see our guide on how redundancy pay is taxed.
The pros of taking voluntary redundancy
There are some genuine advantages.
You often get a better package. As we've covered, employers need volunteers, so they're willing to pay more to get them. You might get significantly more than someone who's made compulsorily redundant.
You leave on your own terms. There's a big psychological difference between choosing to go and being told to go. You have time to prepare, say your goodbyes properly, and feel in control.
You have time to plan. If you know redundancy is coming anyway, volunteering lets you start job hunting now instead of waiting anxiously for the axe to fall. You can negotiate your notice period to give yourself a head start.
You keep your leverage. Because the employer needs volunteers, you're in a stronger negotiating position than you might think. For tips on how to push for more, see our guide on negotiating redundancy pay.
The cons you need to think about
Now the catches. And some of these are significant.
Mortgage payment protection usually won't cover you. This is the one that catches people out. Most mortgage payment protection insurance (MPPI) policies specifically exclude voluntary redundancy. If you're relying on that safety net, check your policy wording carefully before you volunteer. Citizens Advice suggests asking your employer to make you compulsorily redundant instead if mortgage protection is a concern.
Universal Credit complications. You can still claim Universal Credit after voluntary redundancy. But there's a risk the DWP could treat you as having left your job voluntarily without good reason. If that happens, you could face a sanction, which means reduced payments for a period.
In practice, accepting a genuine voluntary redundancy package is generally treated as a real redundancy by the DWP, not as voluntarily quitting. But it's worth knowing about the risk, especially if the circumstances are borderline.
You might regret it. If the restructure gets cancelled, or a new role opens up that would have been perfect for you, you can't easily undo your decision once notice has been given.
You lose your job. Obvious, but worth saying. A better package doesn't help if you can't find another job quickly. Make sure you've done the maths on how long you can manage without income.
Can I change my mind?
Generally yes, you can withdraw your application up until your employer has formally given you notice of termination. Once notice has been issued, it becomes much harder to reverse.
Check the terms of the voluntary redundancy scheme carefully. Some schemes set a deadline for withdrawal. Others are silent on the point, which generally works in your favour.
If you're unsure whether notice has been given, ask your employer in writing. Get clarity before you assume you're locked in.
Negotiating your voluntary redundancy package
This is where a lot of people leave money on the table.
You have leverage because your employer needs volunteers. If not enough people come forward, they have to go through the messy, expensive process of compulsory redundancy. That gives you bargaining power.
Things worth negotiating:
- Higher lump sum. The headline number. Push for more than the initial offer.
- Notice period. Can you get garden leave instead of working your notice? That keeps your pension and benefits running while you look for something new.
- Agreed reference. Get the wording agreed in writing, not just a verbal promise.
- Outplacement support. Career coaching, CV help, interview prep. Ask for it.
- Non-compete clauses. If your contract restricts where you can work next, now is the time to get that removed or shortened.
If your employer asks you to sign a settlement agreement, you'll need independent legal advice from a solicitor, and your employer has to pay for it. That solicitor can also help you negotiate a better deal.
For a full walkthrough, see our guide on how to negotiate redundancy pay.
Age discrimination and voluntary redundancy
Your employer cannot restrict voluntary redundancy to employees of a certain age, or target it at people who are close to retirement. That's age discrimination under the Equality Act 2010.
A voluntary redundancy scheme that's only open to employees over 55, or that gives enhanced terms to those eligible for early retirement, is likely to be discriminatory. If you've been excluded from a VR scheme because of your age, or if the scheme appears to be designed to push older workers out, that's a serious problem and you may have a claim.
Similarly, if the scheme is being used to get rid of younger, cheaper employees to keep more expensive senior staff, that could also be age discrimination.
If something about the scheme feels like it's targeting a particular age group, get advice.
Checklist: what to check before saying yes
Before you volunteer, work through this list.
- Know your statutory entitlement. Use our free calculator to work out the minimum you're owed.
- Read the full package details. Get them in writing. What exactly are they offering?
- Compare to compulsory terms. Is the voluntary package actually better? Sometimes it's not.
- Check your mortgage protection policy. Does it exclude voluntary redundancy? Most do.
- Check your other insurance policies. Income protection, critical illness, life cover. Will any of them be affected?
- Understand the tax position. The first £30,000 is tax-free. Everything above that isn't.
- Think about Universal Credit. If you'll need to claim, understand that the DWP generally treats voluntary redundancy as genuine redundancy, but there's a small risk of a sanction.
- Check your pension. What happens to your employer's pension contributions? Can you stay in the scheme during your notice period?
- Check your contract for restrictive covenants. Non-compete clauses, non-solicitation clauses. Can you negotiate these away?
- Know the withdrawal deadline. Can you change your mind? Until when?
- Get legal advice if there's a settlement agreement. Your employer has to pay for this.
The bottom line
Voluntary redundancy can be a great deal. You often get more money, more control, and more time to plan your next move. But it's not automatically the right choice for everyone.
The biggest traps are mortgage protection exclusions and not negotiating hard enough on the package. Check your insurance policies, know your numbers, and don't accept the first offer without pushing back.
If you're being asked to sign a settlement agreement as part of the process, read our guide on settlement agreements before you put pen to paper.
This article is general guidance about UK redundancy rights. It's not legal advice and shouldn't be treated as a substitute for advice from a qualified employment solicitor.