Voluntary Redundancy Agreement UK: Key Terms Explained

What this document is

A voluntary redundancy agreement is a legally binding contract between an employer and an employee that ends the employment relationship by mutual consent, usually as part of a wider restructuring exercise. Instead of the employer selecting people for compulsory redundancy, staff are invited to put themselves forward and, if accepted, leave with an enhanced package.

The agreement records the termination date, the money being paid, and any ongoing obligations such as confidentiality or references. In most cases the agreement also includes a waiver, sometimes called a settlement clause, where the employee gives up the right to bring claims against the employer in connection with their employment or how it ended.

Under UK law, for that waiver to be effective in respect of statutory employment claims, strict rules apply. The agreement normally needs to qualify as a settlement agreement under the Employment Rights Act 1996, which means the employee must take independent legal advice from a qualified adviser before signing. Without that, the waiver of statutory claims will generally not bind the employee.

How to use this document

1. Check the offer against your statutory entitlement. Before anything else, work out what you would receive in a compulsory redundancy situation. Statutory redundancy pay depends on age, weekly pay (subject to a cap) and length of service. A voluntary package should sit noticeably above that baseline, otherwise there is little incentive to accept. The current statutory cap changes each April, so check gov.uk for the up to date figure.
2. Read the full termination package carefully. Look at every element on offer, not just the headline sum. This can include notice pay, a tax free compensation element (usually up to a statutory threshold), accrued but untaken holiday, bonus or commission, pension contributions, and sometimes outplacement support. Some amounts are taxable and some are not, so the gross figure and the net figure in your pocket may differ significantly.
3. Take independent legal advice on the waiver. If the agreement waives statutory employment claims, such as unfair dismissal or discrimination, you must take advice from a relevant independent adviser for that waiver to be valid. The employer usually contributes toward the cost of this advice. The adviser will explain what rights you are giving up and whether the deal looks reasonable for your situation.
4. Negotiate anything that matters to you. The first offer is rarely the final offer. Common points to push on include the compensation figure, the wording of any reference, the end date, garden leave, post termination restrictions, and confidentiality. If there is a grievance, a disability issue, or a discrimination concern in the background, the leverage is usually stronger than people assume.
5. Sign, date and keep a full copy. Once both sides are happy, sign the final version. Make sure you receive a fully executed copy and keep it somewhere safe alongside your final payslip, P45 and any settlement payment confirmation. You will need these for your tax records and if any question arises later about what was agreed.

Common questions