What you need to know about voluntary redundancy

In situations where an employer needs to select employees where some positions have been made redundant, one option is to offer voluntary redundancies. In this blog post we consider some of the advantages and disadvantages of voluntary redundancy programs.  

Before deciding about whether voluntary redundancies are appropriate, employers are encouraged to check the terms of any relevant enterprise agreement, as some enterprise agreements contain obligations regarding the type of redundancy program to be implemented and additional entitlements for employees.  

Voluntary redundancy 

Voluntary redundancy, as the name suggests, involves employees volunteering for redundancy, on the basis that the employees will receive some benefit for doing so. Some employers, especially in large scale redundancies, offer voluntary redundancies before implementing involuntary redundancies. 

Where voluntary redundancies are going to be offered, careful planning should be undertaken to ensure key employees do not leave the organisation. It is recommended that employers establish the scope of the offer of voluntary redundancy and make it clear that employees may submit expressions of interest, which will be considered by management and may or may not be accepted. 

What are the advantages of voluntary redundancy?  

 The main advantages of voluntary redundancy are that it: 

Improves engagement 

A voluntary redundancy program helps identify employees who want their positions to be made redundant. Such employees may be dissatisfied or unhappy with their role or simply ‘going through the motions’ and with them been given the opportunity to leave on their terms a more engaged workforce may result.  

Relieves the stress associated with compulsory redundancy 

Undertaking an involuntary redundancy program can be a stressful, difficult and emotional experience for everyone involved as leaders strive to meet targets while minimising the human impact.  

Offering a voluntary redundancy program can be less disruptive for the workforce and provides employees with a choice. A voluntary redundancy program may also save time and resources when compared to an involuntary redundancy program.  

Reduces the risk of industrial disputes 

For some organisations there might be a risk of industrial disputes when an involuntary redundancy program is announced. Dealing with this can be a stressful and time consuming experience and cause damage to the company.  

Minimises the potential for unlawful dismissal or discrimination claims

A voluntary redundancy program that is undertaken correctly may minimise the chance of unfair dismissal, general protections, discrimination and/or breach of contract claims being brough against the employer.  

Organisations can minimise the risk of legal action during a voluntary redundancy process by making sure they follow a genuine redundancy process, making sure all redundancy payments meet the required amounts according to the Fair Work Act 2009 and any industrial instruments and contracts.  

In some cases, employers offer volunteers an incentive on top of their minimum entitlements. Where employees are offered entitlements beyond what is required by legislation, industrial instruments or contracts, one option to protect from future claims is to also ask departing employees to sign a deed of release that confirms their redundancy package.  

What are the risks associated with voluntary redundancies?  

Despite the benefits of calling for voluntary redundancies, there are several situations that might arise which can be problematic for employers. These include: 

Obtaining more volunteers than needed  

If this happens, the employer will need to select from among the volunteers. Unless this selection is undertaken according to an open and fair process, those employees whose applications are rejected may feel aggrieved. 

Obtaining the wrong volunteers  

An employer may receive requests for a voluntary redundancy from employees they wish to keep for example, those with the most marketable skills, or those who are otherwise more productive than their peers. To retain these employees, a more attractive role or remuneration may be required.  

Obtaining too few volunteers 

Employees have the right to refuse an offer of voluntary redundancy. If this occurs, an involuntary redundancy process may be necessary. To help minimise a disappointing response, organisations should ensure the benefits on offer are sufficiently attractive to ensure the necessary volunteers 

Discrimination  

It is unlawful for an employer to discriminate against employees when considering eligibility for voluntary redundancy. For example, employees on workers’ compensation or parental leave.  

Resentment  

There may be resentment from employees that are not accepted for voluntary redundancy (for example, because they are high performers with key skills) that some employees were ‘rewarded’ with a redundancy package despite being poorer performers. 

How can an employer retain key personnel?  

For all its benefits, voluntary redundancy requires good management because the employer may end up losing key personnel. Employers should retain a right of veto over applicants for redundancy to ensure that the necessary skills are retained.  

Wording along the following lines may be appropriate to include in redundancy documentation: 

 ‘If redundancies take place, the employer has the right to ensure that it retains those employees whose skills are important to the ongoing success of the business'

Communicating a voluntary redundancy program  

Employer communications announcing voluntary redundancy packages should invite employees to express interest in applying for voluntary redundancy. As mentioned above communications should indicate that calling for an expression of interest does not amount to an offer of redundancy. 

Employee requests for a voluntary redundancy outside of a formal voluntary redundancy program 

 From time-to-time organisations may receive requests for voluntary redundancy from employees. It is important to note that employers to not have to accept an employee’s request for voluntary redundancy however any request should be dealt with in a fair manner. To minimise the likelihood of legal action, encourage consistency and to reduce bias it is recommended that organisations have a formal process in place to ensure that all requests for voluntary redundancy are dealt with fairly and equally.  

Further information

For assistance with redundancy or any workplace matter, Members of Ai Group can contact us or call our Workplace Advice Line on 1300 55 66 77. 

Futher resources to help Members manage the redundancy process include:

• Common Mistakes - Communication and the Redundancy Process
• Redundancy Communication Plan
• The Redundancy section of the HR Resource Centre and our Redundancy Toolkit.