As retail and restaurant closures continue to build across UK high streets, redundancy has certainly become a topic that businesses cannot afford to ignore. Following a large spike in redundancies during the last recession in 2009, levels have remained reasonably solid ever since, with roughly 100,00 people made redundant every year in the UK.
Despite this however, the UK’s retail sector in particular remains in a dire state, with figures from the first three months of 2018 showing that a further 3 percent of people had lost their jobs or had their hours cut within the sector.
With increasing numbers of businesses facing closure, cashflow problems or areas of obsolescence, it is more important than ever that businesses carefully plan for contraction and expansion, relocation and organisational and structural company changes. One way in which employers look to retain business viability and cut unsustainable costs is to offer voluntary redundancy packages to their employees.
What is voluntary redundancy?
Voluntary redundancy is a term used to refer to a package, usually made up of a financial incentive, which is offered by an organisation to encourage an employee or group of employees to voluntarily terminate their contracts in return for the financial incentive.
Voluntary redundancy is usually offered to an employee in situations where business downsizing or restructuring is due to take place. It is usually offered to more senior or long-term employees, but all employees should be able to apply if they wish to be considered.
Will everyone be eligible for voluntary redundancy?
It is entirely your decision who you decide to accept for voluntary redundancy from your business. Voluntary redundancy is normally open to all employees, but just because they may choose to apply, this does not mean that they will all be accepted.
You should carefully consider the financial implications of allowing different employees to take redundancy, against the loss of skills and knowledge against your business in the future.
Why do employers offer it?
Businesses tend to offer voluntary redundancy for various reasons, but one of the main causes tends to centre around company costs. With such a large proportion of business outlay assigned to paying staff salaries, a sudden downturn could well result in it becoming necessary to reduce headcount in order to save on costs.
Voluntary redundancy can also be a way to avoid having to instigate any compulsory redundancies. This can then allow those who are unhappy, or who may already be considering leaving an open avenue by which to leave. It can also avoid having to decide which method to use to select those that could be chosen for compulsory redundancy. It can be a very tough decision to forcefully make any staff redundant, so if there is any way to allow some staff to self-select, it can make a difficult situation a little more comfortable.
Offering voluntary redundancy is often viewed as a more positive move from an employer than simply enforcing a widescale redundancy situation onto staff. It is more consultative, and therefore has a less damaging effect on a company’s reputation when employees choose of their own free will whether or not to put themselves forward. It can eliminate disagreements and bad feeling, and is far less devastating to overall morale than compulsory redundancy.
Are there any alternatives?
If you are opposed to the idea of any redundancy action within your business, there are some alternatives that you could consider that may work equally well for your business.
One option could be offering the option of early retirement to some members of staff. This could result in vacancies becoming available within the business, which could then be taken up by employees who might have otherwise been at risk of redundancy.
Other measures that you could consider in order to avoid any type of redundancy include introducing an external recruitment freeze for a set period of time, severely restricting or banning overtime, introducing the concept of job shares in certain areas, or offering voluntary sabbaticals, career breaks or secondments.
What about voluntary redundancy notice periods?
If you do decide to go ahead and offer voluntary redundancy to any members of your workforce, the notice period that you must provide them with depends largely on how long they have been with your business.
If you offer an occupational pay and benefits scheme, then you are entitled to set your own notice periods for redundancy, so long as they are not shorter than the statutory limits. The statutory notice periods that you must provide include:
- One week’s notice (For those employed between one month and two years)
- One weeks’ notice for each year (For those employed between two and 12 years)
- 12 weeks’ notice (For those employed for 12 years or more within your business)
You should also note that the employees in question are also entitled to ‘reasonable’ time off in order to search for new employment. However, this normally only applies to employees who have been continuously employed for a period of two years or more within your business.
How does voluntary redundancy pay work?
Employees may be entitled to redundancy payments if you have continuously employed for them for at least two consecutive years.
If your business does not have a contractually enhanced pay arrangement, employees with at least two years of continuous employment are entitled to statutory redundancy pay of: