Can Employers Ask for Voluntary Redundancy in the UK?

When your business needs to restructure, one common question is whether you can invite staff to volunteer for redundancy. Done well, a voluntary redundancy (VR) exercise can reduce compulsory job losses, preserve morale and help you pivot quickly.

However, it’s not as simple as sending an email asking for volunteers. UK employment law sets clear rules around fair process, consultation, selection and payments. If you get these wrong, you risk discrimination claims, unfair dismissal, reputational damage and delays to your plans.

In this guide, we’ll explain when you can ask for voluntary redundancy, how to run a lawful and fair process, what to offer, and the pitfalls to avoid. Our goal is to help you stay compliant and protected from day one while making confident, commercially sound decisions.

What Is Voluntary Redundancy And When Can Employers Use It?

Voluntary redundancy is where you invite employees to express interest in leaving under a redundancy package. It sits within the wider redundancy framework under UK law-redundancy still means the role is genuinely disappearing or you need fewer people to do that kind of work because of business closure, changes in location, or reduced need for specific work.

Key points for employers:

• VR is an option, not a separate legal category. Volunteers are dismissed by reason of redundancy, not resignation.
• You can invite volunteers even if collective consultation thresholds aren’t triggered. However, if you propose 20 or more redundancies at one establishment within 90 days, formal collective consultation rules apply.
• You are not obliged to accept every volunteer. You should retain the right to refuse applications where business critical skills, cost, or workforce balance would be compromised.
• Volunteers are generally entitled to statutory redundancy pay (if they have 2+ years’ service) and other lawful entitlements on termination. Many employers also offer an enhancement to encourage volunteers.

In practice, VR works well when you want to minimise compulsory redundancies, reduce the risk of disputes, and show transparency during a restructure.

What Laws Apply When You Offer Voluntary Redundancy?

Even if staff volunteer, the same legal framework applies as for any redundancy. As an employer, you should keep the following in mind:

• Employment Rights Act 1996: Redundancy is a potentially fair reason for dismissal, but you must follow a fair process (including consultation) and make lawful payments.
• Trade Union and Labour Relations (Consolidation) Act 1992: Collective consultation is required where you propose 20+ redundancies at one establishment within 90 days; minimum consultation periods apply (at least 30 days for 20–99 redundancies and 45 days for 100+). You must also file an HR1 to notify the Secretary of State.
• Equality Act 2010: You must not directly or indirectly discriminate in any part of the process, including who is invited, who you accept, and how you structure packages.
• Contractual obligations and policies: Your Employment Contract terms, redundancy policy and any collective agreements must be followed.
• Tax rules on termination payments: Different tax treatment applies to redundancy pay, notice pay and benefits-get this right from the outset.

If this feels like a lot to juggle, don’t stress-good preparation and a clear VR framework can keep you compliant and reduce risk. For tailored support on process design and risk spots, it’s worth speaking with a lawyer about Redundancy Advice.

How To Lawfully Invite Staff To Volunteer For Redundancy

The best VR processes are transparent, time-bound and carefully documented. Here’s a practical approach that keeps you onside with UK law while protecting your business interests.

1) Set The Business Case And Scope

Start with a clear, evidence-based rationale for the change. Define the roles at risk, the “selection pool” and the number of redundancies needed. A VR invitation should explain the reason, the roles in scope and the overall timetable.

Make sure your business case shows a genuine redundancy situation-don’t use VR as a proxy for performance management. If there are performance or conduct issues, handle those separately and fairly.

2) Decide Your VR Offer And Eligibility

Outline who can apply (e.g. anyone in the affected pool) and whether you’ll consider cross-department volunteers. Set any exclusions (e.g. critical roles) carefully to avoid discrimination risks.

Decide what you’ll offer volunteers, such as:

• Statutory redundancy pay (if eligible) and whether you’ll add enhanced redundancy pay
• Notice pay (worked or paid in lieu), accrued holiday pay, bonuses (if contractually due), and benefits cut-off dates
• Outplacement support or career coaching
• Whether you’ll use a settlement agreement (commonly called a Deed of Settlement) to document terms and waive claims

Be consistent and publish clear criteria for accepting or declining volunteers, including skills retention, cost and business continuity factors.

3) Map Your Consultation Obligations

Redundancy requires consultation, whether or not you use VR. If collective consultation applies (20+ redundancies at one establishment in 90 days), engage elected representatives or a recognised union. Start consultation early enough to allow meaningful input.

Provide the required information (reasons, numbers, selection pool, proposed method of selection, timing, payments, avoidance measures) and consider alternatives raised. Consultation must be genuine-decisions shouldn’t be a done deal before you start.

4) Invite Expressions Of Interest (EOIs)

Share your VR invitation in writing. Include:

• A summary of the business rationale and the roles in scope
• Eligibility and any exclusions
• The financial package and high-level tax treatment
• How to apply and the deadline for EOIs
• Confirmation that you may decline applications to protect business needs
• A statement that VR is voluntary and no pressure will be applied

Offer private meetings to answer questions and provide individual estimates of payments. Keep communications consistent and supportive-VR should feel like a genuine option, not a tactic to push out particular people.

5) Assess Applications Against Clear Criteria

Apply your acceptance criteria fairly and consistently. Document decisions and rationale. Consider the risk of losing critical knowledge or creating skills gaps that could undermine your plan.

Where volunteers are declined, offer a brief and non-discriminatory explanation. Keep those individuals engaged in the broader consultation-declining VR doesn’t remove them from the process if their role remains at risk.

6) Finalise Terms And Issue Agreements

Once you accept a volunteer, confirm the terms in writing. Many employers use a settlement agreement to provide certainty and a full and final waiver of claims (employees must take independent legal advice for the waiver to be valid, and employers usually contribute to the legal fee).

Ensure the termination letter or agreement captures notice, termination date, payments, benefits and return of company property. Follow your policy and any contractual steps for ending an employment contract fairly.

What Should Your Voluntary Redundancy Package Include?

Packages vary by sector and seniority, but here are the common building blocks:

• Statutory redundancy pay (for employees with 2+ years’ service) calculated by age, length of service (capped) and weekly pay (subject to the statutory cap).
• Enhanced payment (optional) to encourage volunteers-this should be clear and consistently applied to avoid unfairness.
• Notice pay: either worked or payment in lieu (PILON) if your contract allows. Note that notice pay is taxable and subject to NICs.
• Accrued but untaken holiday pay and any other contractual sums (e.g. commission earned, bonuses where due under the plan rules).
• Benefits: clarify the end date for private healthcare, car allowances, share plans, or other perks.
• Outplacement support or references, if part of your offer.
• Settlement agreement contribution: a reasonable sum towards independent legal advice for the employee, if you’re using a settlement agreement.

Tax treatment matters. Typically, the first £30,000 of genuine redundancy pay can be paid free of income tax and NICs, but PILON, holiday pay and most contractual sums are taxable. Getting this wrong can undermine the attractiveness of your package and lead to payroll issues-seek advice early.

If you’re weighing up payment types and obligations, it can help to understand the differences between severance vs redundancy from an employer perspective.

Common Pitfalls When Asking For Voluntary Redundancy (And How To Avoid Them)

Voluntary doesn’t mean risk-free. These are the mistakes we see most often-and the simple fixes that keep you compliant.

1) Pressuring Individuals To Volunteer

Invitations must be genuinely optional. Targeting specific employees or implying there will be consequences if they don’t volunteer can lead to constructive dismissal or discrimination allegations. Keep the messaging even-handed and offer a clear process for EOIs.

2) Using VR To Avoid A Fair Redundancy Process

VR doesn’t replace consultation. You still need a fair selection pool, meaningful consultation and objective criteria if you later move to compulsory redundancies. Short-cutting process is a key reason why employers lose employment tribunals.

3) Accepting Volunteers You Can’t Afford To Lose

Retaining critical skills and knowledge is vital. Make sure your acceptance criteria are robust and consistently applied, and retain the discretion to decline applications where necessary for business continuity.

4) Discriminatory Criteria-Direct Or Indirect

Even neutral criteria can have a disparate impact. For example, accepting only those close to pensionable age could be indirectly discriminatory unless you can justify it. Run your criteria through an Equality Act lens and take advice where needed.

5) Inconsistent Packages Or Hidden Rules

Inconsistency breeds grievances. Publish your package formula and apply it consistently. Where exceptions are necessary (e.g. for very senior staff), document the legitimate business rationale.

6) Overlooking Contractual And Policy Obligations

Make sure your Employment Contract terms, redundancy policy and any collective agreements are aligned with your approach. Where changes to terms are a potential alternative to redundancy (like reduced hours), remember that changing employment contracts in the UK requires a lawful process and employee consent.

7) Not Using A Settlement Agreement When Appropriate

A well-drafted settlement agreement (commonly called a Deed of Settlement) gives certainty for both sides, documents the package, and waives most employment claims. It’s not always essential, but it’s a powerful tool for clean exits at scale.

Do You Have To Accept Every Volunteer?

No. As the employer, you control who is accepted, because you’re responsible for running a fair and sustainable restructure. Reasons to decline might include:

• Retaining critical skills or key customer relationships
• Preventing skills gaps in regulated or safety-critical functions
• Budget constraints if one volunteer’s package is significantly higher than others
• Maintaining the right workforce balance after the restructure

Be transparent upfront that VR is discretionary. When declining a volunteer, provide a brief, neutral explanation. Keep clear records showing how decisions align with your published criteria in case they’re later scrutinised.

How Does Voluntary Redundancy Fit With Collective Consultation?

If you’re proposing 20 or more redundancies at one establishment within a 90-day period, you must collectively consult with representatives (or a recognised union). You can still ask for volunteers as part of that process, and you can accept volunteers during collective consultation-provided consultation remains meaningful and you don’t pre-judge outcomes.

Remember the key duties under the TULR(C)A 1992 framework:

• Initiate consultation early and provide required information in writing.
• Consider ways to avoid dismissals, reduce numbers, and mitigate consequences.
• Observe minimum consultation periods (30 or 45 days) before issuing notice of dismissal.
• Submit HR1 to the Secretary of State within the statutory timelines.

Volunteers still count towards the proposed number for collective consultation purposes. Keep your paperwork tight and your communications consistent across all channels to avoid confusion.

What Are Employees Entitled To If They Volunteer?

Volunteers are generally entitled to the same core payments as anyone dismissed by reason of redundancy:

• Statutory redundancy pay (2+ years’ service), subject to age and weekly pay caps
• Contractual redundancy pay if your policy or contracts promise more
• Notice (worked or PILON), accrued holiday, and any contractual sums due
• Enhanced payments if you’ve offered them as part of the VR package

It’s common for employers to offer an enhancement to encourage volunteers-especially if you want to reduce the number of compulsory dismissals. Consider your budget, internal equity and precedent.

If you’re weighing up how generous to be, look at your workforce profile, the competitiveness of your market, and the savings timeline. If your plan includes enhancements, document the formula clearly in case you ever need to justify it.

Should You Use Settlement Agreements For Volunteers?

While not mandatory, settlement agreements are widely used for volunteers because they provide clarity and closure. In brief:

• They set out the financial and non-financial terms (payments, benefits, references, confidentiality, restrictive covenants reminders).
• They include a waiver of most employment claims. For the waiver to be valid, the employee must receive independent legal advice.
• Employers typically contribute to the employee’s legal fee for that advice.

If you’re running a larger VR exercise, a standardised settlement agreement process helps ensure compliance, consistency and efficient delivery.

Alternatives To Voluntary Redundancy You Should Consider

Consultation requires you to consider alternatives that could save jobs. Depending on your circumstances, that might include:

• Recruitment freezes or natural attrition
• Redeployment to suitable alternative roles (document the offers and reasons if declined)
• Reduced overtime or agency spend
• Short-time working or temporary lay-off (if you have a contractual right)
• Changes to hours, duties or benefits by agreement-remember that changing employment contracts in the UK must follow a lawful process

Exploring alternatives in good faith strengthens your position should any dismissals be challenged later on.

Documentation And Records: Protect Yourself From Day One

Good documentation is your safety net. Keep:

• The business case, headcount data and cost analysis
• Consultation materials, meeting notes and responses to feedback
• The VR invitation, eligibility rules and acceptance criteria
• Decision records explaining acceptances and declines
• Individual calculations and signed agreements

Strong paperwork makes it far easier to demonstrate that your process was fair and non-discriminatory. It also helps maintain trust with your remaining team, who will be watching closely how you handle the change.

Key Takeaways

• Yes, you can ask for voluntary redundancy in the UK-just remember it sits within the same legal framework as any redundancy and requires a fair, transparent process.
• Define a genuine business case, set clear eligibility and acceptance criteria, and communicate a consistent VR package to avoid unfairness and discrimination risks.
• Consultation still applies. If you’re proposing 20+ redundancies at one establishment within 90 days, follow collective consultation rules and file HR1.
• Volunteers are usually entitled to statutory redundancy pay (2+ years’ service) plus any enhancements you offer; get tax treatment right and document terms clearly.
• Use a settlement agreement (a Deed of Settlement) where appropriate to secure a waiver of claims and provide clean exits.
• Don’t feel obliged to accept every volunteer-retain discretion to protect critical skills and business continuity, and document your decisions carefully.
• Keep your Employment Contract terms, policies and process aligned, and focus on ending an employment contract fairly to reduce dispute risk.
• If you’re unsure about package levels, process design or consultation duties, get tailored Redundancy Advice early-it’s faster and cheaper than fixing problems later.

If you’d like help designing a compliant voluntary redundancy process, drafting communications or preparing settlement agreements, you can reach us on 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.