What Actually Is Voluntary Redundancy?
We often hear of the term redundancy but the term Voluntary Redundancy is not heard of by many
and its real meaning is still not clear to many people. Albeit many people know it to be quite different than the
other forms of redundancy, they are unsure as to its real meaning and what goes into it. We now shed some light on
what Voluntary Redundancy actually is and how it takes place.
Voluntary Redundancy is the name given to the situation where the organization tends to provide a financial
incentive to all or a certain group of its employees, so that they take up the payment and voluntarily leave the
This is also known as a golden handshake. In most cases, a Voluntary Redundancy scheme is developed and
administered by an organization either for the purpose of downsizing or due to the fact that the organization
structure has to be changed and the organization no longer needs the services of those employees or a particular
segment of such employees.
The main aim of a Voluntary Redundancy scheme is to reduce the threat of possible action that may be taken by
the trade union that represents such employees.
In many cases, it has been observed that the primary objective of a Voluntary Redundancy program may not be to
cut costs and become profitable in the short term. Rather, it is an elaboration of what is known as the
intellectual capital strategy of the company, which is a subset of the human resource strategy of the organization.
This intellectual strategy tends to state that in terms of increasing creativity and innovation in the company,
fresh blood must be inducted to the company at regular intervals.
This will bring in new ideas and creativity since the old staff tends to get demoralized and becomes uncreative
after a certain period of time, which has a dire impact upon the competitive strength possessed by an organization.
It is therefore necessary to replace the old staff with new ones. This would cause the intellectual capital of the
organization to increase and the organization would now benefit from the innovation, ideas and competence of the
new staff, which in turn, would allow it to become more competitive for future challenges to be taken.
The study also revealed that those who undertake the Voluntary Redundancy program are more likely to return to
their organization at a later stage during their careers and bring new ideas and aspirations along with them,
adding further to the intellectual capital of the said company.
The difference between Voluntary Redundancy and normal redundancy programs is that the normal
redundancy is carried out across the length and breadth of an organization, whereas Voluntary Redundancy is offered
to a certain segment of the employees, for example, say, those between the age of 35 and 55 who have gained five
yeas of experience and whose salaries of the last twelve months have been paid in full. Under the Voluntary
Redundancy program, a lump sum package may be offered to these employees and new employees would then be selected
in their place.
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