What’s voluntary redundancy?

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Voluntary redundancy is an alternative to firing unnecessary employees without proper procedure. It varies in popularity based on employment laws and social responsibility. In the US, it is less common due to “at will” employment laws.

Voluntary redundancy is a term used to describe compromise agreements between employers and employees when an organization must reduce or eliminate parts of its workforce. When an employee role becomes redundant, it is no longer critical or useful to an organization’s operations. In situations where labor laws or societal expectations inhibit an organization’s ability to fire unnecessary employees without cause or proper procedure, voluntary redundancy offers an alternative. The employer and employee reach an agreement under voluntary redundancy, whereby the employee voluntarily relinquishes a position in exchange for an incentive or financial settlement.

Employment laws vary greatly between countries and even between jurisdictions within countries. As such, the use of voluntary redundancy programs and severance package offers for redundant employees varies. Typically, the more restrictive a jurisdiction’s employment laws are regarding termination, the more popular voluntary redundancy programs are in that region. In European countries such as Germany and the United Kingdom, complex labor law requirements make corporate restructuring difficult in terms of job elimination. As an alternative to lengthy notices, consultations with employee representatives, and other precursors to a layoff, many organizations opt for private arrangements with employees who voluntarily leave the company.

Most US states have “at will” employment laws, which means that both employer and employee retain the right to terminate an employment contract for any reason. Such arrangements allow US organizations to downsize, restructure, or completely eliminate employee positions as necessary to meet organizational objectives. Few US companies or human resource management companies offer voluntary redundancy programs for employees subject to layoffs or other redundant redundancies. Only in cases where union agreements, individual employment contracts, or policies published in employee handbooks specifically limit the terms under which employees are subject to termination, do US companies offer voluntary redundancy programs.

In addition to the legal requirements that make voluntary redundancy programs popular, there is a social responsibility that employees must consider during corporate restructuring. Faced with the possibility of being fired, employees of retirement age or with promising career prospects often voluntarily resign to help save their co-workers’ jobs. Keeping these employees and mindsets in mind, many organizations will offer voluntary redundancy arrangements in an effort to minimize the social impact and public perception of restructuring efforts. Socially responsible employers who choose to offer voluntary redundancy arrangements for employees can often mitigate negative responses to layoffs by including retraining, financial incentives, and relocation assistance in an employee’s severance package.

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