Voluntary Redundancy – Should I Stay or Go?

- by Becky Hall

Losing your job unexpectedly can cause severe emotional and financial distress. If you think redundancy may soon become a reality, voluntary redundancy could be a better option for you. Cashfloat explores how.

Lost Your Job? What Can You Do? – Chapter Two

What are the benefits and drawbacks to voluntary redundancy?  - Cashfloat

Why Should You Consider Voluntary Redundancy?

There are many reasons why it may be an option to consider voluntary redundancy. Here are a few:

The Difference Between Compulsory And Voluntary Redundancy

When a business is looking to downsize or is undergoing some structural changes, redundancy often follows. Although it might seem simple, there is confusion about what is voluntary redundancy and what is compulsory.

Voluntary Redundancy

Firstly, if you lose your job and then your ex-employer hires someone else to do the same work, this is not redundancy. Also, if you are being made redundant, then you must be compensated for the loss of your job. Voluntary redundancy happens when an employer offers a financial incentive to an employee to leave of their own free will. Voluntary redundancy may be because the workforce needs to be slimmed down or because of a restructuring.

Compulsory Redundancy

This state of affairs occurs when an employer decides to slim down the workforce, but they choose who is to go. An employee will have no say in the matter. This is distressing for workers who do not wish to leave. If an employer decides to offer voluntary redundancy to avoid some of the workforce losing their jobs, then you may be tempted by the thought of a big pay off. But before volunteering for redundancy, you should consider the following factors.

Voluntary Redundancy Pay

At first glance, taking voluntary redundancy can seem to be an opportunity to get a lump sum payment that could pay off some long term or short term loans or even a mortgage, and it could also give you the chance to change your career. But at this point, it is important to look at the big picture before you jump in with both feet.

The size of a redundancy settlement is vital. The amount will depend on upon factors such as the length of your employment at the company, your age, and your pay grade. Voluntary redundancy payouts are usually higher than statutory payments. These are the general guidelines for voluntary redundancy pay:

  • Under 22 years old: You get half a weeks pay for each year worked.
  • 22 – 41 years old: You get one week pay for each year worked.
  • 42 years and older: You get one and a half weeks pay for each year worked.
Voluntary redundancy is when you choose to leave - Cashfloat

Voluntary Redundancy Calculator

You can use a voluntary redundancy calculator to calculate how much statutory redundancy you can get. The calculations are based on your age, the pay you received and how long you have been on the job. You have to have worked for at least 2 years by your employer to qualify for statutory redundancy pay. Click here for an online calculator to work out your redundancy pay.

Think About Budgeting

Before you take the voluntary redundancy option, it is important to draw up a budget and work out exactly what is paid out each month. Then, work out how long a redundancy payment will last. Of course, if you are nearing retirement then it could be a good option as you may only have a year or a few months to last before your receive a pension. However, if you are not yet nearing retirements, then this may be the time to consider a change of career, so search for information about the job market before you take this huge life changing step.

It is important for you to make sure that you will be financially covered before you take this big step of possibly going for redundancy. You do not want to walk away from your current job position only to find that you have to take out loans online to pay for your living expenses.

What are employed candidates looking for in a new job? - Cashfloat What are employed candidates looking for in a new job? - Cashfloat

Notice Period For Voluntary Redundancy

An employer must give you the correct amount of notice before making you redundant. If your employer has offered you voluntary redundancy then use this period to look for another position. Unless you are in a situation where you are ready to retire, then finding another job is a priority so start immediately to look for work.

If you have decided that voluntary redundancy is the path you want to take, now is the time to think about your work priorities. Many people who have lost their job use the opportunity to change their career. They view the redundancy factor as a good option.

A change of direction at work may need new skills. Think about retraining, either using a college course or take advantage of classes on offer at the Job Centre. There is also the option of volunteering. This can give you some added experience to put on your CV.

Voluntary Redundancy FAQs

What is the voluntary redundancy process?

The process may start when your employer decides s/he needs to make some redundancies and they ask for volunteers. If you decide to volunteer for redundancy, your employer will give you a period of notice when your job will terminate. When you leave, you will be eligible for voluntary redundancy pay.

Can I ask for voluntary redundancy?

This depends on why you want to ask for voluntary redundancy. If your employer plans on making some employees redundant, it is probably a good idea to ask for voluntary redundancy. If you want to ask for voluntary redundancy because you have received another job offer, you should know that you can not receive voluntary redundancy pay if you move on to a new job straight away. You need to wait a period of time after leaving your old job, before starting a new job if you do take redundancy money.

Is voluntary redundancy pay tax-free?

Yes, until £30,000 redundancy pay is tax-free and free from national insurance contributions.

Can I ask for voluntary redundancy on health grounds?

You can try ask your employer if you can receive voluntary redundancy payment. Your employer does not have to comply with your request, particularly if they are planning to replace you. Your employer may be willing to grant voluntary redundancy if they do not plan on filling your role.

For some more really good advice on voluntary redundancy, go to citizensadvice.org.uk.


Losing a job either through compulsory or voluntary redundancy can be a life-changing event. However, it is not always such a catastrophe. Many people take the opportunity to change career direction. If you are considering a deliberate redundancy, then do some research and weigh up the pros and cons. Then, if you feel comfortable about prospects for the future, go ahead and do it.

Want to apply for a jobseeker's allowance? Find you nearest Jobcentre Plus - Cashfloat Want to apply for a jobseeker's allowance? Find you nearest Jobcentre Plus - Cashfloat
About The Author
Becky Hall
Becky never thought she would be a financial blogger. But Fate arranged that Becky had to put her accounting degree on the back burner right after she graduated with a first in Business and Accounting. While doing bookkeeping as a freelancer for private clients, Becky noticed how many cashflow problems can be solved with a little bit of education. Trying to keep her clients out of debt, Becky began writing resources which she distributed to clients. What began as writing advice for clients evolved into a passion and now Becky found her platform at Cashfloat. When she isn’t writing, calculating or budgeting, Becky can be found at her piano playing something classical.
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