What Are Voluntary Layoffs and How Do They Work?

A voluntary layoff is a layoff that is initiated by an employee rather than an employer. In this situation, employees volunteer to be laid off in exchange for a severance package. This differs from a traditional layoff in which management chooses individuals to be laid off.

During budget cuts or an economic downturn, some businesses may issue a call for voluntary layoffs and give their employees the option of requesting to be laid off. This call takes the form of a voluntary layoff letter.

Businesses will sometimes send out a voluntary layoff letter notifying employees of their options so that they do not have to resort to involuntary layoffs.

Voluntary layoffs are when an employee decides on their own to leave their job without pay and accept a severance package. With a voluntary layoff, employees are offered a financial incentive encouraging them to either resign or retire.

AOL’s Voluntary Layoff Program And What It Means

How do companies decide between a furlough and voluntary layoffs?

If a company needs to downsize its team, there are a number of ways that the management team can accomplish this, including furloughs and voluntary layoffs. While both of these are effective strategies for downsizing a workforce, the primary difference lies in whether the employer wants to retain an employee long-term.

If an employee is voluntarily laid off, there is no guarantee that they will be offered the option to return to the company when economic conditions improve. In contrast, a furlough is a temporary pause in employment. The employer may want to retain the employee long-term but may also be unable to pay them for a period of time. Additionally, a furlough potentially allows the employee to continue receiving medical insurance and other benefits.

What are voluntary layoffs?

Voluntary layoffs are when an employee decides on their own to leave their job without pay and accept a severance package. With a voluntary layoff, employees are offered a financial incentive encouraging them to either resign or retire. Unlike a traditional layoff where the company chooses which employees will be laid off, during a voluntary layoff, employees self-select who will participate and give up their benefits and employment voluntarily.

Some employees may choose to accept a voluntary layoff if they want to pursue other work or life goals. They may also simply welcome the opportunity to make a change in their employment, particularly if it helps their co-workers maintain employment.

Benefits of voluntary layoffs

If a company recognizes that they need to significantly reduce their workforce because of financial reasons, restructuring, relocating or other reasons, they may benefit from voluntary layoffs. Voluntary layoffs allow you to:

How do voluntary layoffs work?

There is no set process for how voluntary layoffs work and you may want to evaluate how other companies handle voluntary reductions of their workforces. Generally, the first step in the process is to explain to your staff that you are offering voluntary layoffs. Its important for the announcement to be transparent, explaining the incentive youre offering and providing details about what positions qualify for the incentive and any additional requirements.

For example, if you are specifically trying to reduce the number of employees in your manufacturing department, you need to specify that the incentive is only available to manufacturing staff. Its generally a good idea to work closely with your legal counsel to ensure youre following all state and federal laws and that you apply the right requirements.

What do companies include in a voluntary layoff policy?

A voluntary layoff policy can include several different types of information, including:

Frequently asked questions about voluntary layoffs

Here are a few of the most frequently asked questions about voluntary layoffs:

Whats the difference between a voluntary and involuntary separation?

Voluntary separation is where an employee requests to leave their job. An involuntary separation is when an employee separates from their job and the separation is beyond the employees control.

What is in a severance package?

Many employers offer a severance package that includes one or two weeks or paid salary for every year that the employee was with the company. In most cases, employees are given 21 days to accept the agreement and, once its signed, seven days to change their mind.

Can you get another job while on furlough?

In generally, employees who are on furlough leave are allowed to accept a second job if their employer doesnt mind. However, its important to remember that being on furlough means the employee is still employed and that accepting a new position could potentially put them in breach of contract.


How do you negotiate a voluntary layoff?

Clarify what benefits you will receive by taking a voluntary layoff and get them in writing. Ask the company representative if you will receive a severance package. High performing workers who volunteer for a layoff can sometimes receive a better severance package if they negotiate well.

Why do companies do voluntary separation?

The purpose of the voluntary separation program is to allow employees to voluntarily separate employment when business needs demand a reduction in force.

Is it better to be furloughed or laid off?

If you’re laid off, you’ll likely only be able to keep benefits that are portable—and only if you pay their full cost. A furlough will reduce your hours, with a commensurate reduction in pay. Your employer might cut your hours by 10%, by half, or might have you stop working entirely.

What are three alternatives layoffs?

Look at Alternatives to Layoffs
  • Reduce your workweek. Going from a five-day workweek to a four-day workweek reduces payroll by 20 percent, Zickerman noted. …
  • Extend time off. …
  • Challenge employees to save money. …
  • Offer sabbaticals. …
  • Swap employees or lend them to another company. …
  • Look to your peers for help.

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