When a company has to take on a policy of redundancy, it is because it cannot afford to keep the current level of staff on due to a decline in business. Voluntary redundancy allows employees to come forward and offer to leave instead of forced redundancy, whereby the employer makes the decision on its own.
The employer will notify his employees that the company plans to make some redundancies and then invite staff to volunteer to take a redundancy package. The employer will decide how many people to let go and then select volunteers that rank lowest in length of service, attendance, performance and qualifications, because it is generally the employer's intention to ensure that he keeps his best employers on.
Redundancy in a company can be extremely stressful and disruptive for the employer and employees alike, so offering voluntary redundancy to staff could be less upsetting than compulsory redundancy. This method also reduces the need to check that the redundancies are fair because the decision has come from the employees themselves.
It can cost the company much more in redundancy payments because the employer might have to offer more money to encourage people to volunteer. Also, the employer has less control over who is let go.
If an employer receives more employees volunteering for redundancy than are needed, she must ensure that she does not select people to let go based on age, medical background, sexual preferences, pregnancy or part-time status.