Compulsory Redundancy vs Voluntary Redundancy: What is Better?

Published : June 19, 2025

When an employee loses their job, it can be extremely difficult, especially when it’s out of their control. It doesn’t always have to be this way, though, since employers sometimes offer voluntary redundancy. Unlike compulsory redundancy, employees can choose to terminate their employment, usually under more favourable terms.

Below, we examine the difference between voluntary and compulsory redundancy and discuss when employees should consider each option. We explore the advantages and disadvantages of volunteering, and discuss whether employees can change their minds.

If you have any questions about the redundancy process or believe your rights have been breached, please contact Redmans Solicitors. As employment law experts, we can analyse your circumstances, answer your queries, and discuss your possible options.

To get started, simply:

Voluntary vs Compulsory Redundancy

Before determining which type of redundancy process may apply in a given situation, it’s important to understand the key differences between them. Redundancy occurs when an employer no longer requires employees to perform a particular type of work, often due to downsizing, restructuring, or business closure.

Voluntary redundancy typically involves employees agreeing to leave, often with a financial package, after the employer extends an invitation. That being said, the employer retains the right to accept or decline these offers.

Conversely, compulsory redundancy happens when the employer selects who will be made redundant, using fair and objective selection criteria. This process must comply with employment law, including the provision of appropriate consultation and redundancy pay.

In practice, employers often use a combination of both approaches. Initially, they may offer voluntary redundancy to encourage departures, before moving to compulsory redundancy if further reductions are necessary to meet workforce targets.

How Does the Voluntary Redundancy Process Work?

While each redundancy process can differ, a voluntary redundancy usually begins with an employer discussing its situation with its workforce. It may be that the organisation is being sold or has come under financial hardship and needs to downsize.

Whatever the case, unlike compulsory redundancy, the employer doesn’t select individuals to leave. Instead, the employer invites employees to volunteer for redundancy by outlining the financial compensation and other benefits available, such as statutory redundancy pay (typically available after two years of continuous employment) and any enhanced packages.

Employees who volunteer aren’t obligated to accept the terms until they have reviewed and signed an agreement. Before signing, they can negotiate the exit package or refuse any terms they find unfavourable. Once an agreement is finalised, the terms will likely be documented in a formal settlement agreement, and volunteers will generally serve their notice period or receive payment in lieu of notice.

Employers must ensure the process is transparent and non-discriminatory. Although voluntary redundancy is not subject to the same selection criteria as compulsory redundancy, the way opportunities are communicated should still be fair, with all eligible employees given a reasonable chance to consider the offer.

Is it Better to Take Voluntary Redundancy Over Compulsory Redundancy?

Whether it’s better to take voluntary redundancy depends on several factors. One of the most significant benefits of doing so is that it usually involves a more favourable exit package. Employers looking to entice volunteers may offer enhanced financial compensation or benefits compared to what’s typically available through compulsory redundancy. It is worth noting, though, that this isn’t always guaranteed and is very much at the employer’s discretion.

For some employees, volunteering may be a tempting option. For example, if they’re approaching retirement, already planning to move on, or confident in their ability to find a new role, taking voluntary redundancy could offer a clean and financially favourable break.

However, there are potential disadvantages of doing so. If an employee volunteers but struggles to secure work, they could end up financially worse off in the long run. Additionally, voluntary redundancy can affect redundancy protection insurance, as many of these only cover compulsory job losses. Therefore, it’s essential to review the terms of any existing policy.

It’s also worth bearing in mind that voluntary redundancy is still classed as a dismissal under UK employment law. As a result, employers will likely ask volunteers to sign a settlement agreement, waiving their right to bring claims, such as unfair dismissal. While the terms can sometimes be negotiated, it’s essential to review what is being offered thoroughly.

What Else Should I Consider Before Volunteering?

Aside from financial concerns, it’s also important to consider how redundancy could affect one’s long-term career goals, pension entitlements, or access to future employer benefits. If an employee is part of a workplace pension scheme, they should check whether leaving early affects their contributions or benefits. Additionally, considering how it might impact applications for mortgages or loans is essential.

So, while voluntary redundancy may offer more generous pay compared to that in compulsory redundancy, it doesn’t come without its risks. Anyone considering it should weigh the financial and personal implications and consider seeking legal advice to help decide whether it’s the right move.

Can I Withdraw My Application for Voluntary Redundancy?

Once an employer has accepted an employee’s application for voluntary redundancy, it generally cannot be reversed unless the employer agrees. If the application is still pending approval, however, there may be an opportunity to withdraw it.

Whether or not an employee can change their mind will depend on the process their employer is following. Employees should, therefore, consult with their employer to determine what’s possible. In any event, since there’s no guarantee an application can be withdrawn, it’s essential to carefully consider one’s decision before volunteering for redundancy.

If you have any questions about voluntary or compulsory redundancy, or have been made redundant and believe your rights have been violated, contact us today. Redmans Solicitors are employment law experts, and following a quick chat, we can provide specialist advice.

We can review your exit terms, help you understand your rights, and ensure you’re not pressured into accepting an agreement that’s not in your best interest.

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The information on this page is intended for general informational purposes only and does not constitute legal advice.