Articles > Employment

What is Voluntary Redundancy?

February 23, 2022   Philip Evangelou

Voluntary redundancy is where the employee on their volition voluntarily agrees to become redundant. Such a situation may arise where a company wishes to downsize or a company becomes bankrupt or insolvent. Usually an employer will provide a payment to the employee but an employee is well within their rights to turn down an offer of voluntary redundancy. 

Requirements for the Employer 

For a redundancy to be considered genuine, the redundancy must meet certain requirements such as:

  • Have considered re-employing or transferring the employee elsewhere within the company
  • The employee’s role can no longer be performed due to the operations of the business, such as upgrades to technology or new machinery that does not need human supervision
  • Complied with the awards which mandates the employees redundancy and relevant payments 

If these requirements are not met, an employer may be liable to an unfair dismissal claim from their employee. Employers also cannot offer voluntary redundancy to an employee on an unlawful basis, such as dsicrimination or being a member of the union. 

Pros of Voluntary Redundancy

Some of the advantages of choosing and offering voluntary redundancy includes:

  • The process is quicker
  • Financial incentives, although to receive such redundancy payment the employee must have been working at the company for at least 1 year and the company should have more than 15 employees at the time
  • Can leave the company on good terms 

Cons of Voluntary Redundancy

Some of the disadvantages associated with accepting and offering voluntary redundancy includes:

  • Higher costs for the company 
  • Chances of risk during the process that can open a corporation to unfair dismissal claims 
  • Lower the morale of the remaining workforce 

If you wish for further information or advice on voluntary redundancy, please reach out to us through the contact form or by calling us on 1300 377 997.

About Philip Evangelou

phillipPhil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.