Voluntary Termination – Definition

Cite this article as:"Voluntary Termination – Definition," in The Business Professor, updated May 21, 2019, last accessed October 25, 2020, https://thebusinessprofessor.com/lesson/voluntary-termination-definition/.


Voluntary Termination Definition

Voluntary termination may mean various actions, most popularly the decision of an employee to quit a job of their own accord. Furthermore, it may refer to the act of voluntarily canceling personal financial contracts, like cell phone contracts or car leases, or voluntarily canceling institutional level contracts such as interest rate swaps and credit default swaps.

A Little More on What is Voluntary Termination

An employee may decide to leave a job for various reasons. For instance, a change in personal circumstances like family demands, a choice to return to school, discontent with working conditions like having a hostile supervisor, no recognition of work performance and also lack of independence, challenge, or relationship, and much more. A specifically common reason for voluntary cancellation is leaving for a new and more favorable job which offers a better payment plan or improved career prospects. Often times, it is cited as the reason for quitting a job during strong economic growth periods and times of labor market demand as against during periods of recession. Overall, conventional wisdom opines that workers don’t leave their jobs as much as they leave their supervisors as a result of conflicts in management technique, disrespectful attitudes, or poor communication over objectives, practices, and goals.

Voluntary Termination Procedures

An employee’s voluntary termination usually starts with a spoken or written resignation notification to their supervisor, even though a job abandonment may be present, when a worker decides not to show up for work for three days consecutively, without informing a supervisor.

In general, employees who decide to quit a job are expected to provide a minimum of two weeks notice before their last day at work. When submitting their notice of resignation, an employee can expect an instant forwarding by their supervisor to human resources coupled with their reason for leaving and intended end date. Different processes can be expected by the employee once the human resource department is involved. The employee can expect to be asked for the return of company property, for the finalization and submission of final expense reports, scheduling of an exit interview, and get a summary of their post-termination benefits. It is possible for supervisors to be requested to fill out a Supervisory Termination Summary, which would be submitted to human resources. For more information, check Procedures for Voluntary and Involuntary Terminations from the Society for Human Resource Management.

Voluntary Termination: Other Forms

Voluntarily canceling financial contracts may or may not attract penalties. In the case of a penalty, the party who intends to terminate the contract might be able to justify the termination decision supposing the net benefit from canceling the contract is substantially greater than the penalty.

References for Voluntary Termination

Academic Research on Voluntary Termination

Termination of dynamic contracts in an equilibrium labor market model, Wang, C. (2011). Journal of Economic Theory, 146(1), 74.

The effect of voluntary termination of overfunded pension plans on shareholder wealth, VanDerhei, J. L. (1987). Journal of Risk and Insurance, 131-156.

Best practices on contract design in public-private partnerships, Iossa, E., Spagnolo, G., & Vellez, M. (2007). World Bank, Working Paper.

Sickness absence as a risk factor for job termination, unemployment, and disability pension among temporary and permanent employees, Virtanen, M., Kivimäki, M., Vahtera, J., Elovainio, M., Sund, R., Virtanen, P., & Ferrie, J. E. (2006). Occupational and Environmental Medicine, 63(3), 212-217.

Voluntary Obligations and the Scope of the Law of Contract, Penner, J. E. (1996). Legal Theory, 2(4), 325-357.

The implicit pension contract: developments and new directions, Ippolito, R. A. (1987). Journal of Human Resources, 441-467.

The contract: Uses, abuses, and limitations, Seabury, B. A. (1976). Social work, 21(1), 16-21.

Limitations on Contract Termination Rights–Franchise Cancellations, Gellhorn, E. (1967). Duke LJ, 465.

Contracts: Adjustment of long-term economic relations under classical, neoclassical, and relational contract law, Macneil, I. R. (1977). Nw. UL Rev., 72, 854.

The many faces of voluntary employee turnover, Krausz, M. (2002).(pp. 53-70). Springer, Boston, MA.

On Golden Parachutes-Ripcords or Ripoffs-Some Comments on Special Termination Agrements, Riger, M. (1982). Pace L. Rev., 3, 15.

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