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Non Compulsory and Compulsory Redundancy

Non-compulsory redundancy is essentially the same as voluntary redundancy. But they both follow a different set of rules to compulsory redundancies.

Asking your employees for volunteers to resign is non compulsory redundancy. It then becomes a process to select which staff you make redundant.

Making redundancies non-compulsory is an implementation used to improve goodwill and reduce ill-feeling. As a rule, this arrangement gets introduced during early stages of company redundancies.

Non-compulsory redundancies provide an opportunity for elderly workers to retire early. It is also an effective way for ‘less committed’ staff to leave the organisation on good terms.

Success will usually depend on a high number of employees applying for voluntary redundancy. A low head count of volunteers often results in a need to make compulsory redundancies.

Note: This guide also explains the difference between voluntary redundancy and compulsory redundancy.

Voluntary Redundancy Rules

Struggling businesses often use voluntary redundancy (VR) to downsize or restructure. They use the financial incentive to encourage employees to resign voluntarily.

Voluntary redundancy has several advantages. As a rule, employees often find it less demoralising. Whereas employers see it as less disruptive than forcing compulsory redundancy.

Non compulsory redundancy has disadvantages too. It is often more expensive to entice staff to leave of their own free will. It usually results in companies offering enhanced redundancy payments.

That said, top management reserve the right to turn down those who are volunteering for redundancy. But, that can result in negative feelings from those got turned down.

There have been cases where this situation resulted in an imbalance of staff experience and skill levels.

The principle purpose is to avoid staff layoffs and short time working. But, in some less scrupulous cases, the system can sidestep union employee regulations.

Employers must have a fair and transparent voluntary redundancy selection process. It is important to inform staff that the system is non-compulsory – but not automatic. That means they may not get selected simply because they applied for it.

Taking Early Retirement

Company management often see early retirement as an alternative to non-compulsory redundancy. It is a way of offering an incentive for some employees to retire early.

But, you must make the offer across the entire workforce. The rules do not allow you to single out specific individuals to take early retirement.

Note: Forcing someone into early retirement is not allowed. The choice must be that of the employee.

Compulsory Redundancy Rules

Once you have decided to instigate compulsory redundancies, you must then:

  • Use a selection process which identifies those you will make redundant.
  • Ensure you use a fair system to select people and avoid discriminating anyone.

Fair Selection Process for Redundancy

There are various fair reasons to use when selecting employees for redundancy, including:

  • Qualifications, skill levels, and aptitude.
  • Performance and standard of work.
  • Attendance and disciplinary record.

Some see ‘last in, first out‘ as a fair selection process for redundancy. It means you select those based on their total length of service. But, you must be able to justify using this selection criteria. If it affects one specific group of people only, it could be indirect discrimination.

Note: Relying on length of service as your single selection criteria could be age discrimination.

Unfair Selection Process for Redundancy

You should avoid any unfair selection criteria for redundancies. Do not select any employees for redundancy based only on any of these reasons:

Note: Fair redundancies mean you should always have redundancy consultation with your employees.

Compulsory and Non-Compulsory (Voluntary) Redundancy Rules