Do you get more money for voluntary redundancy?

Voluntary redundancy usually comes with a better financial package than compulsory redundancy. Employers offer enhanced terms to incentivise volunteers and avoid the disruption and legal risk of compulsory selection. Enhanced packages might include multiples of the statutory formula, uncapped salary calculations, or additional lump sums. However, there is no legal requirement to offer more for voluntary redundancy, and some employers pay the same statutory amount regardless.

Does voluntary redundancy affect Universal Credit or other benefits?

Voluntary redundancy does not automatically disqualify you from benefits. You can claim Universal Credit after voluntary redundancy, though any redundancy payment you receive will be assessed as capital (savings) if it takes your total savings above £6,000. Savings between £6,000 and £16,000 reduce your Universal Credit entitlement, and savings above £16,000 disqualify you entirely. Jobseeker's Allowance (contribution-based) is generally unaffected by savings. You should not face a benefit sanction for taking voluntary redundancy as it is still a genuine redundancy.

Can an employer refuse your application for voluntary redundancy?

Yes, an employer can refuse a voluntary redundancy application. Employers are not obligated to accept every volunteer. They may refuse if you hold skills that are critical to the business, if too many people from one department volunteer, or if releasing you would cause operational difficulties. The employer retains discretion over which volunteers to accept, though their decisions should not be discriminatory.

Can you be made compulsorily redundant after volunteering was rejected?

Yes, it is possible to be rejected for voluntary redundancy and then subsequently selected for compulsory redundancy, though this is relatively unusual. If the employer does not get enough volunteers to meet their target headcount reduction, they may proceed to a compulsory process. If you are then selected under the compulsory criteria, you would typically receive the compulsory redundancy terms rather than the enhanced voluntary terms.

Voluntary vs Compulsory Redundancy

Q: What is the difference between voluntary and compulsory redundancy?

Voluntary redundancy is when an employer invites employees to put themselves forward for redundancy, usually with an enhanced financial package as an incentive. Compulsory redundancy is when the employer selects which employees will be made redundant, typically using objective selection criteria. Both are genuine redundancies in legal terms, and employees are entitled to statutory redundancy pay in either case, provided they have at least two years of continuous service.

When a business needs to reduce its workforce, it may approach the process in two distinct ways: asking for volunteers or selecting employees compulsorily. The difference between voluntary and compulsory redundancy affects your financial package, your sense of control over the process, and potentially your entitlement to state benefits. This guide explains both approaches in detail so you can make an informed decision if you are faced with either situation.

What Is Voluntary Redundancy?

Voluntary redundancy occurs when an employer announces that it needs to reduce headcount and invites employees to put themselves forward for redundancy. Employees who are interested apply or express their willingness to leave, and the employer then decides which volunteers to accept.

Employers often prefer to start with a voluntary process because it causes less disruption, reduces the risk of unfair dismissal claims, and tends to generate less ill feeling within the remaining workforce. To attract enough volunteers, employers typically offer a financial package that is more generous than the statutory minimum, which is known as an enhanced redundancy package.

It is important to understand that volunteering for redundancy is not the same as resigning. When you take voluntary redundancy, you are being dismissed by reason of redundancy. This distinction matters for your legal rights, your entitlement to statutory redundancy pay, and your ability to claim benefits.

What Is Compulsory Redundancy?

Compulsory redundancy is when the employer decides which employees will lose their jobs, without those employees having volunteered. The employer must use a fair and objective selection process, which is a legal requirement. Common selection criteria include:

Skills, qualifications and experience relevant to the ongoing work
Performance records and appraisal scores
Attendance and disciplinary records
Length of service (though this should not be the sole criterion as it may indirectly discriminate on the basis of age)

The employer must identify a "pool" of employees from which the selection will be made. This pool should include all employees who do the same or similar work. Selecting from too narrow a pool, or using subjective criteria, can make the redundancy unfair and expose the employer to tribunal claims.

Employers must also follow a proper consultation process during compulsory redundancy. This includes individual consultations with affected employees and, where 20 or more redundancies are proposed at one establishment within 90 days, collective consultation with employee representatives.

Pros and Cons of Volunteering for Redundancy

If your employer offers a voluntary redundancy scheme, you will need to weigh up the advantages and disadvantages before deciding whether to apply.

Advantages of Voluntary Redundancy

Better financial package - voluntary schemes almost always offer more than the statutory minimum, sometimes significantly more
Control and agency - you choose to leave rather than being selected against your will, which can make the transition psychologically easier
Time to prepare - you can plan your departure, update your CV, and begin job searching while still employed
Positive departure - leaving voluntarily tends to result in a better reference and a more amicable parting with your employer
Avoid the compulsory process - if compulsory redundancies follow and you might be selected anyway, volunteering gives you the enhanced package rather than the basic terms

Disadvantages of Voluntary Redundancy

Loss of employment - you are giving up a job, income and workplace community, which should not be underestimated
Uncertainty about re-employment - there is no guarantee of finding equivalent work quickly, particularly in specialised fields or during economic downturns
Possible regret - if the remaining workforce is retained and the business recovers, you may wish you had stayed
Impact on pension - leaving early can affect your pension, particularly if you are in a defined benefit scheme where additional years of service would increase your entitlement
Financial pressure - even an enhanced package will eventually run out, and the gap between jobs can create financial stress

Does Voluntary Redundancy Affect Benefits?

A common concern for anyone considering voluntary redundancy is whether it will affect their entitlement to state benefits. The short answer is that taking voluntary redundancy should not disqualify you from claiming benefits, but the redundancy payment itself may affect the amount you receive.

Universal Credit

You can claim Universal Credit after voluntary redundancy. Taking voluntary redundancy is treated as a genuine redundancy, not as leaving your job voluntarily, so you should not face a benefit sanction. However, your redundancy payment will be assessed as capital (savings). Under Universal Credit rules:

Savings up to £6,000 are ignored completely
Savings between £6,000 and £16,000 reduce your Universal Credit by £4.35 per month for every £250 above £6,000
Savings above £16,000 disqualify you from Universal Credit entirely

This means that if you receive a significant redundancy payment, you may need to wait until your savings fall below £16,000 before you qualify for Universal Credit. You should factor this into your financial planning.

Jobseeker's Allowance

Contribution-based Jobseeker's Allowance (known as "new style" JSA) is not means-tested, so your redundancy payment does not affect your entitlement. You can claim it for up to 182 days provided you have paid enough National Insurance contributions in the relevant tax years. Income-based JSA, which is being replaced by Universal Credit, is means-tested and would be affected by your savings in a similar way to Universal Credit.

Other Benefits

Statutory Sick Pay, Housing Benefit (where it still exists), and Council Tax Reduction schemes may all be affected by capital from a redundancy payment. If you have specific concerns about benefits, contact your local Jobcentre Plus or Citizens Advice before making a decision.

Can an Employer Refuse Voluntary Redundancy?

Yes. An employer is not obliged to accept every application for voluntary redundancy. There are several legitimate reasons an employer might refuse a volunteer:

Critical skills - if you hold skills, qualifications or knowledge that are essential to the ongoing business, the employer may need to retain you
Departmental balance - if too many volunteers come from one team or department, releasing all of them could be operationally unsustainable
Cost considerations - in some cases, the cost of an enhanced package for a long-serving senior employee may exceed what the employer is willing to pay
Succession planning - the employer may have identified you as important for future plans or restructured roles

However, the employer's decision about which volunteers to accept must not be discriminatory. Refusing a volunteer because of their age, sex, race, disability, pregnancy, or any other protected characteristic would be unlawful. If you believe your application was refused for a discriminatory reason, you should seek legal advice.

Pay Differences Between Voluntary and Compulsory Redundancy

The financial difference between voluntary and compulsory redundancy can be substantial, though it varies between employers.

Voluntary Redundancy Pay

Voluntary packages are typically enhanced to incentivise applications. Common enhancements include:

Double or triple the statutory redundancy formula
Calculation based on actual weekly pay rather than the £719 cap (£749 in Northern Ireland)
A fixed number of months' salary per year of service
An additional lump sum on top of the statutory calculation

The tax treatment is the same as for any redundancy pay: the first £30,000 of redundancy compensation is tax-free, with any excess subject to income tax.

Compulsory Redundancy Pay

With compulsory redundancy, employers are only legally required to pay the statutory minimum. Some employers have contractual or policy-based enhanced terms that apply to all redundancies (voluntary or compulsory), but many offer only the statutory amount for compulsory departures. This means compulsory redundancy pay is often significantly less than the voluntary package.

In either case, the statutory minimum is the same and is calculated using the standard formula based on your age, years of service, and weekly pay.

What Happens After Voluntary Redundancy Closes?

If the employer does not receive enough volunteers to achieve the required headcount reduction, it will typically move to a compulsory redundancy process. This means that even if you did not volunteer, you could still be at risk of redundancy through the compulsory selection process.

Conversely, if too many people volunteer, the employer will need to select from among the volunteers. This is sometimes done on a first-come-first-served basis, but more commonly the employer will apply selection criteria similar to those used in compulsory redundancy, or will make decisions based on operational needs.

It is also worth noting that if you volunteer and are accepted, you cannot then change your mind and insist on staying. Once you have agreed to voluntary redundancy and the employer has accepted your application, you are committed to the arrangement unless both parties agree to reverse it.

Redundancy During a Protected Period

Special rules apply if you are on maternity leave, adoption leave, or shared parental leave during a redundancy exercise. In these circumstances, you have a priority right to be offered any suitable alternative vacancy ahead of other employees. This protection applies regardless of whether the redundancy is voluntary or compulsory.

Making Your Decision

If you are weighing up whether to volunteer for redundancy, consider the following questions:

How secure is your current role? If compulsory redundancy is likely and you might be selected, volunteering could mean a better package for the same outcome.
What is your financial position? Can you afford a period without employment income?
What does the job market look like in your sector and location?
Are you close to a milestone such as a pension age or a length-of-service threshold that would increase your entitlement?
Would you welcome a change of direction in your career?

Take time to consider these factors carefully. You are not required to make a snap decision. Ask your employer for the full terms in writing, including the deadline for applications, and seek advice from a trade union representative, Citizens Advice, or an employment solicitor if you are unsure.

Calculate Your Statutory Entitlement

Whether you are considering volunteering or have been told you are at risk of compulsory redundancy, the first step is knowing your statutory baseline. Use our free UK Redundancy Pay Calculator to find out exactly what the statutory minimum is for your situation. You can then compare this with any enhanced offer your employer makes.