Voluntary Termination: Definition, Process, and Real-Life Examples


Voluntary termination refers to an individual’s decision to end employment or cancel financial contracts, such as car leases or cell phone plans, on their own accord. This article explores voluntary termination in-depth, differentiating it from being fired or laid off, and covers the process, special considerations, and key takeaways.

Understanding voluntary termination

Voluntary termination, often simply referred to as “voluntary quit” or “resignation,” is a significant decision made by an employee to leave their job or to terminate a financial contract without external pressure. It stands in stark contrast to involuntary terminations, such as layoffs or firings, where the employer or another party initiates the end of the relationship.

Voluntary termination in employment

In the context of employment, voluntary termination encompasses a range of reasons an employee might choose to part ways with their current job. These reasons may include:

1. Personal circumstances

Change in personal circumstances, such as family demands, relocation, or health issues, can lead employees to opt for voluntary termination.

2. Pursuing further education

A common motive for voluntary termination is the desire to return to school or pursue additional education to enhance career prospects.

3. Dissatisfaction with working conditions

Issues like a hostile work environment, conflicts with supervisors, lack of recognition, autonomy, or healthy work relationships can drive employees to resign voluntarily.

4. Better job opportunities

Many individuals decide to leave their current employment for a new job that offers improved remuneration, career growth, or better working conditions.

It’s important to note that voluntary termination often correlates with economic factors. During periods of robust economic growth and high labor market demand, employees are more likely to seek better opportunities. In contrast, during recessions or when companies are under financial stress, they may encourage voluntary resignations to reduce the need for layoffs. In such cases, employers may offer departing employees enhanced exit packages, including extended severance pay and continued health benefits.

Pros and cons:

Weigh the risks and benefits

Here is a list of the benefits and drawbacks to consider.


  • Empowers employees to make career decisions based on their needs and goals.
  • Can lead to better job opportunities and improved work-life balance.
  • May result in enhanced exit packages during company downsizing.


  • Loss of job security and guaranteed income.
  • Potential challenges in securing unemployment benefits.
  • Reputational risks if leaving a job for less-than-ideal reasons.

The process of voluntary termination in employment

Voluntary termination typically follows a structured process. When an employee decides to resign, they often begin with a verbal or written notification to their immediate supervisor. In certain cases, repeated absence from work without communication may also be perceived as job abandonment.

Employees who choose to leave their jobs are generally expected to provide a notice period of at least two weeks. This notice period serves several purposes:

1. Transition planning

A notice period allows the employer to start the process of finding a replacement, ensuring a smooth transition.

2. Administrative tasks

During the notice period, the departing employee may need to finalize expense reports, return company property, and schedule an exit interview.

3. Human resources involvement

The supervisor typically forwards the resignation notice to the human resources department, along with the intended departure date and the reason for leaving. This initiates the formal process of voluntary termination.

In some cases, the employee’s supervisor may be required to complete a supervisory termination summary, which is submitted to human resources.

Special considerations in financial contracts

Voluntary termination is not limited to employment. It can also apply to personal financial contracts, such as cell phone plans or car leases. When individuals choose to terminate such contracts, there may or may not be associated penalties. The decision to terminate depends on a cost-benefit analysis, where the net benefit from termination must outweigh any penalties incurred.

Examples of voluntary termination

Voluntary termination can manifest in various situations beyond employment and financial contracts. Here are some examples that illustrate the concept:

1. Lease termination

Lease agreements for apartments or commercial spaces often allow tenants to request voluntary termination. For instance, a tenant may decide to move to a different city for a new job or personal reasons and choose to end their lease early. Depending on the lease terms, there may be financial penalties, such as forfeiting a security deposit or paying a fee.

2. Gym memberships

When individuals subscribe to gym memberships, they usually sign contracts with specific terms. However, life circumstances can change. For example, someone who has been a gym member for years may decide to terminate their membership due to a medical condition or a change in fitness goals. The process typically involves notifying the gym management and adhering to any cancellation policies.

3. Streaming services

In today’s digital age, many people subscribe to streaming services for entertainment. These services often come with monthly or annual commitments. Voluntary termination in this context means canceling the subscription. Individuals might do this if they find a better service, no longer have time for streaming, or simply wish to cut expenses. The termination process usually involves accessing the account settings and following the platform’s cancellation procedure.

Legal considerations in voluntary termination

When it comes to voluntary termination, whether in employment or contracts, several legal aspects need to be considered:

1. Employment contracts

In some professions, employees may have specific clauses in their contracts regarding voluntary termination. These clauses can address notice periods, confidentiality agreements, and non-compete clauses. It’s crucial for employees to understand these terms to avoid any legal repercussions.

2. Contractual penalties

Financial contracts, such as those for cell phone plans or car leases, often include clauses about early termination. These clauses may stipulate penalties or fees for canceling before the agreed-upon period ends. Individuals should carefully review these terms and assess whether the benefits of termination outweigh the associated costs.

3. Unemployment eligibility

The eligibility for unemployment benefits after voluntary termination varies by jurisdiction. It’s important to be aware of the specific rules and regulations governing unemployment benefits in your area. Quitting for a “good cause” is generally a recognized exception, but what constitutes a good cause can differ.

These legal considerations highlight the importance of thoroughly understanding the terms and potential consequences before proceeding with voluntary termination. It’s advisable to seek legal counsel when in doubt.

The impact of voluntary termination on credit

One aspect often overlooked in voluntary termination is its potential impact on an individual’s credit. While it’s more commonly associated with financial contracts, it can also affect employment-related decisions.

Credit default swaps

In the realm of financial contracts, terminating agreements like credit default swaps can affect an individual or business’s creditworthiness. These swaps are a form of insurance against default on loans or bonds. Terminating a credit default swap could signal financial instability to creditors, potentially affecting credit scores.

Employment history

In the context of employment, voluntarily leaving a job may influence future employers’ perception. Employers often inquire about the reasons for leaving a previous job during interviews. Being transparent and offering valid reasons can help mitigate any negative impact on future career prospects.


Voluntary termination represents a pivotal moment in an individual’s career or financial life. Whether it’s resigning from a job or canceling personal contracts, understanding the process and potential consequences is crucial. It empowers individuals to make informed decisions that align with their goals and circumstances.

Frequently asked questions

What is the key difference between voluntary termination and involuntary termination?

Voluntary termination is when an individual makes the decision to leave their job or cancel a financial contract on their own accord. In contrast, involuntary termination, such as layoffs or firings, is initiated by the employer or another party.

Can I collect unemployment benefits after voluntary termination?

In most cases, voluntarily leaving a job may disqualify you from collecting unemployment benefits. However, eligibility can vary depending on your location and the circumstances of your departure. For example, if you quit for reasons considered a “good cause,” like unsafe working conditions, you might still be eligible in some jurisdictions.

What legal considerations should I be aware of when considering voluntary termination?

Legal aspects can vary based on your employment contract and the type of financial contract you’re terminating. Some employment contracts may include clauses about notice periods, confidentiality, or non-compete agreements. Financial contracts often have penalties for early termination. It’s essential to thoroughly review these terms and, if needed, seek legal counsel.

How can voluntary termination affect my credit and employment history?

In financial contracts, like credit default swaps, terminating agreements can signal financial instability to creditors, potentially impacting your creditworthiness. When it comes to employment, voluntarily leaving a job may influence future employers’ perception. They often ask about the reasons for leaving your previous job during interviews. Being transparent and providing valid reasons can help mitigate any negative impact.

Are there benefits to voluntary termination in times of company downsizing?

Yes, some companies facing downsizing may ask employees to voluntarily resign to reduce the need for layoffs. In such cases, they often offer departing employees enhanced exit packages, including extended severance pay and continued health benefits. This can make voluntary termination a more attractive option during downsizing.

Key takeaways

  • Voluntary termination involves an individual’s decision to leave employment or end financial contracts.
  • Common reasons for voluntary termination include personal circumstances, further education, dissatisfaction with work conditions, and better job opportunities.
  • Employees typically provide a notice period when voluntarily terminating employment, allowing for a smooth transition.
  • Voluntary termination can also apply to personal financial contracts, with decisions based on cost-benefit analysis.
  • Employers may request voluntary resignations during downsizing, often accompanied by enhanced exit packages.
View article sources
  1. Termination of Employment Definition: Your Guide to a … – SuperMoney
  2. Give notice of completion or termination of voluntary … – Gov.uk
  3. Voluntary Termination of Employment Act – International Labour Organization