This guide is maintained as a current resource for July 2026 and covers only the laws of England and Wales. Information is for general guidance, not legal advice. Consult a qualified solicitor for advice specific to your situation.
Considering voluntary redundancy? Understand the legal requirements, your rights during consultation, and the potential risks-including discrimination and unfair dismissal-before you sign.
Voluntary redundancy schemes can be an effective tool for employers to reduce headcount while giving employees a choice about leaving. However, even though employees are volunteering, these schemes engage a complex set of legal issues under UK employment law. Voluntary redundancy is still a dismissal by reason of redundancy, and employers must observe statutory requirements and fair process to avoid tribunal claims, discrimination claims, and financial penalties. This article explains the key legal issues that arise with voluntary redundancy schemes, the statutory context, common risks, rights and remedies, and practical steps both employees and employers should consider.
Understanding Voluntary Redundancy in Legal Context
Voluntary redundancy occurs when an employer invites employees to offer themselves for redundancy or when an employee offers to be made redundant during a redundancy process. Importantly, voluntarily agreeing to redundancy does not mean resignation. Under the Employment Rights Act 1996, it remains a dismissal by reason of redundancy, triggering the same statutory protections as compulsory redundancy. Employees who accept voluntary redundancy can therefore still claim for redundancy pay and, where relevant, challenge the fairness of their dismissal.
Genuine Redundancy Situation
A core legal issue is whether a voluntary redundancy scheme is linked to a genuine redundancy situation. The employer must establish a real need to reduce staff due to business change, reduced work volumes, restructuring or workplace closure. Simply using “voluntary redundancy” as a way to remove individuals for other reasons (such as targeting specific employees) can expose the employer to claims for unfair dismissal or discrimination. Some legal commentary emphasises that a “sham redundancy” where the reason for redundancy is not genuine can lead to litigation.
Consultation Obligations
Individual Consultation
Even when redundancy is voluntary, employers must still conduct meaningful individual consultation with affected employees. There is no statutory minimum period for individual consultation, but it must be timely and genuine, allowing employees to ask questions and employer to consider alternatives. Failing to consult properly can increase the risk of claims that the dismissal (even voluntary) was unfair.
Collective Consultation Requirements
Where a voluntary redundancy scheme results in 20 or more employees being dismissed as redundant at a single establishment within 90 days, collective consultation duties arise under the Trade Union and Labour Relations (Consolidation) Act 1992. This means employers must consult with recognised trade unions or elected employee representatives, provide written information about the redundancies and observe minimum consultation periods (30 days for 20–99 employees, 45 days for 100+). Voluntary redundancies count toward the total when determining whether collective consultation applies. Failure to comply can lead to a protective award of up to 90 days' pay per employee.
Selection and Fair Criteria
In schemes where more employees volunteer than can be accepted, employers must apply objective and transparent criteria for deciding which applications to approve. These criteria should relate to the genuine needs of the business and be free from bias or discrimination. Failing to do so can give rise to discrimination claims under the Equality Act 2010 if protected characteristics (such as age, sex or disability) are treated unfavourably. For example, in Donkor v The Royal Bank of Scotland, an Employment Appeal Tribunal found that excluding older workers from a voluntary redundancy scheme could amount to age discrimination.
Process Transparency and Consistency
Legal issues often arise where employers treat volunteers inconsistently or without clear rationale. Sprintlaw UK highlights frequent pitfalls such as offering different redundancy packages without transparent justification or targeting specific individuals for redundancy invitations. These practices can lead to claims for unfair dismissal, breach of contract, or discriminatory treatment. Ensuring consistency and documenting objective business reasons for decisions reduces legal risk.
Unfair Dismissal Risks
Voluntary redundancy is still a dismissal, and employees can bring claims for unfair dismissal if the process leading to the dismissal was not fair or the redundancy situation was not genuine. The Employment Appeal Tribunal confirmed in White v HC‑One Oval Ltd that accepting a voluntary redundancy offer does not mean that an employee cannot pursue an unfair dismissal claim if there are grounds to challenge how the process was handled or how the redundancy situation was created.
Discrimination and Equality Issues
Voluntary redundancy schemes must comply with the Equality Act 2010. Employers can face discrimination claims if invitations or decisions about voluntary redundancy disproportionately disadvantage employees with protected characteristics. For example, excluding certain groups from applying or offering less favourable terms based on age or other protected traits can be unlawful. Objective selection criteria and equal access to the scheme are essential to mitigate these risks.
Contractual Issues and Settlement Agreements
Voluntary redundancy packages often involve enhanced redundancy pay or settlement terms. Any variation from contractual redundancy terms must be handled carefully. Misrepresenting contractual rights, changing terms without proper agreement, or failing to honour enhanced redundancy packages can lead to breach of contract claims. Employers may use settlement agreements to resolve redundancy exits, but these must be voluntary and employees should be advised to seek independent advice for the agreement to be enforceable.
Time Limits for Claims
Employees considering claims – whether for unfair dismissal, discrimination, breach of contract, or protective awards – must observe statutory time limits. Typically, unfair dismissal or discrimination claims must be presented to an employment tribunal within three months less one day from the effective date of termination, after first notifying Acas Early Conciliation. Protective award claims also follow similar time limits. Missing these deadlines can bar the right to pursue legal remedies.
Practical Steps for Employers
- Document a genuine redundancy rationale and ensure voluntary redundancy is part of a lawful redundancy process.
- Consult individually and, where necessary, collectively with employees or their representatives.
- Apply objective selection criteria if not all volunteers can be accepted.
- Avoid discriminatory practices and ensure equal access to the scheme.
- Communicate terms clearly in writing and consider settlement agreements for enhanced packages.
- Comply with statutory thresholds and notify the Redundancy Payments Service when required.
Practical Steps for Employees
- Request written scheme details, including eligibility, criteria and rationale.
- Review your contract and redundancy policy to understand statutory and enhanced terms.
- Participate actively in consultation and ask questions about how decisions are reached.
- Keep records of communications and key documents.
- Seek independent advice from Acas, Citizens Advice or a solicitor if you believe the process is unfair, discriminatory, or contractual entitlements are misrepresented.
- Consider Acas Early Conciliation before bringing a tribunal claim.
Common Questions
Can an employer refuse my voluntary redundancy request?
Yes. The employer is not obliged to accept all volunteers and must consider business needs when deciding which applications to approve.
Does voluntary redundancy count toward collective consultation?
Yes. Voluntary redundancies count toward the number of proposed redundancies when determining whether collective consultation duties apply.
Can I bring an unfair dismissal claim after voluntary redundancy?
Yes. Accepting a voluntary redundancy offer does not eliminate the right to challenge the fairness of the dismissal or the process if there are grounds such as genuine redundancy issues or procedural failures.
Key Takeaways
Voluntary redundancy schemes sit within the statutory redundancy framework in England and Wales and engage complex legal issues. Employers must ensure that schemes are part of a genuine redundancy exercise, that consultation and selection are fair and transparent, and that discriminatory or inconsistent practices are avoided. Employees retain statutory rights, including redundancy pay rights and the ability to challenge unfair dismissals, even when they volunteer. Careful planning, documentation and compliance with statutory duties help both sides manage the risks and legal obligations associated with voluntary redundancy schemes.
