Difference Between Voluntary and Compulsory Redundancy

Voluntary vs Compulsory Redundancy

Voluntary redundancy and compulsory redundancy are terms we hear when a company is undergoing a transition and decides to downsize the workforce. In today’s economic scenario where unemployment is on the rise, redundancy is a dread word enough to send shivers down the spine of employees. Redundancy is a normal practice when an employer is shutting down business or when he feels there is no need for the number of employees he is having. However, if an employer fires you and hires your replacement, it is not called redundancy. Voluntary and compulsory redundancy are two types of redundancy. People are often confused with the differences between the two. Redundancy, whether voluntary or involuntary, entails payment to those who are dismissed because of no fault of their own. This is known as redundancy compensation.

Voluntary redundancy takes place when an employer declares financial incentive to those who leave of their own accord, as he wishes to downsize the workforce. Those who opt for voluntary redundancy are offered compensation. Companies do this in the least painful way as it allows those who wish to leave without pressurizing and it is the personal choice of the employees to accept voluntary redundancy or not.

Compulsory redundancy on the other hand refers to a situation where the management selects the staff to be made redundant and employees do not have a choice whether they want to accept it or not. This is a painful situation for the staff as many of those selected for redundancy do not wish to leave.

In normal practice, when a company wishes to prune the size of its workforce, voluntary redundancy is declared with a compensation package. But if there are no takers for voluntary redundancy, the company is forced to select the employees on its own that are offered compulsory.