Close this search box.

Table of Contents

Voluntary Termination


Voluntary termination is a clause which may be included in a financial contract, allowing the borrower to end the contract before the full repayment term is complete. It typically applies to specific types of agreements like lease purchase schemes or hire purchase contracts. The borrower may have to pay a certain fee or a proportion of the remaining balance to execute the voluntary termination.


The phonetics for the keyword “Voluntary Termination” is: vɒlənˌtɛri tərˌmɪnˈeɪʃən

Key Takeaways


  1. Voluntary termination refers to an individual’s decision to leave their employment on their own terms. This can include resigning, retiring, or ending a contract prematurely. The individual holds the power of decision in voluntary termination scenarios.
  2. One must consider the implications of voluntary termination carefully, as it can present challenges in claiming unemployment benefits. In many jurisdictions, these benefits are only accessible to those who involuntarily lose their employment.
  3. A principal advantage of voluntary termination is the flexibility it offers the employee. It allows them substantial control over their career path and decisions, and may also be perceived more favorably by future employers as compared to involuntary termination.



The business/finance term, Voluntary Termination, is important because it refers to a situation where an employee chooses to leave a company on their own accord, rather than being fired or laid off. This could be due to various reasons such as a new job offer, retirement, relocation, personal circumstances, or dissatisfaction with the current job. Voluntary termination has significant implications on workforce planning, talent management, and organizational strategy. For businesses, understanding the causes of voluntary termination can help improve employee retention strategies, while from the employee perspective, it may impact their future job prospects, benefits, and retirement plans.


In the financial and business world, voluntary termination is a commonly used term that primarily serves the purpose of ending business agreements or relationships. Voluntary termination often indicates that an individual or company desires to cease their current arrangements or engagements voluntarily, without the invocation of certain repercussions that might follow forced or mandatory termination. Such conveniences generally work advantageous for both parties involved, granting them the freedom and flexibilities to reassess their commitments and priorities.Particularly in asset financing, for instance, voluntary termination allows the end customer to terminate lease agreements or hire purchase contracts before their term completion. If, for whatever reason, the customer can no longer afford payments, or no longer needs the asset, they can initiate a voluntary termination. This serves to limit their losses—a crucial part of managing financial uncertainty or hardship. Similarly, employees may also resort to voluntary termination (resignation), mitigating risks of unfavorable work environments and seeking better prospects. Consequently, voluntary termination is a vital provision in many financial/business contracts, serving as a practical solution to unforeseen circumstances and providing avenues for ameliorating potential damages.


1. Employee Resignation: In the corporate sector, a common example of voluntary termination is when an employee chooses to resign from their job. This could be due to various reasons – such as finding a better job opportunity, moving to a different location, changing career paths, or personal reasons like family commitments or health issues. Whatever the reason, it’s a voluntary decision made by the employee to end their employment contract.2. Ending a Lease Agreement: Let’s say a business that rents office space from a landlord decides it no longer wants to continue the lease. This could be because the business has found a more cost-effective location, is going remote, or shutting down. The business would voluntarily terminate the lease agreement before its original end date, often in accordance with the terms lined out in the contract for such situations.3. Loan Repayment: In finance, voluntary termination can also refer to the situation where a borrower voluntarily chooses to terminate a loan agreement like a credit agreement or car finance agreement. This typically involves the borrower paying off the outstanding balance on the loan instead of continuing with the scheduled repayments to the end of the loan term. For instance, under the Consumer Credit Act in the UK, borrowers have the right to voluntarily terminate a Hire Purchase or Personal Contract Purchase agreement once they have repaid 50% of the total amount payable.

Frequently Asked Questions(FAQ)

What is Voluntary Termination?

Voluntary Termination refers to a decision by an employee to leave their current job by their own choice. This could be because of a career change, retirement, relocation, or personal reasons.

Does a voluntary termination mean the employee has done something wrong?

No, voluntary termination usually means the employee chose to leave their job. It is not necessarily related to job performance or any wrongdoing.

What impacts can voluntary termination have on a business?

Impacts can vary. Some potential consequences may be gaps in manpower, possible loss of expertise or institutional knowledge, costs related to hiring or training a replacement, etc.

Can an employee apply for unemployment benefits after a voluntary termination?

Typically, unemployment benefits are for individuals who have been dismissed from their jobs through no fault of their own. Voluntary termination usually does not qualify for unemployment benefits, but regulations can differ based on location and circumstances.

How should a business handle an employee’s voluntary termination?

It’s important for businesses to conduct an exit interview to understand the reasons behind the employee’s decision and to gain feedback. They should also remove the employee’s access to company resources and communicate the departure appropriately to the rest of the team or company.

What are the responsibilities of an employee who decides to voluntarily terminate their employment?

The employee should usually provide a notice period (often two weeks), complete all pending work and hand over responsibilities, return any company property, and respect any non-compete or confidentiality agreements after they leave the company.

Can voluntary termination affect future employment opportunities?

It can vary case by case. In general, if an employee leaves their job on good terms and can provide a valid reason for their decision during future interviews, voluntary termination might not negatively affect future employment.

What’s the difference between voluntary termination and involuntary termination?

Voluntary termination is when the employee decides to leave the job, whereas involuntary termination is when the employer or company decides to end the employee’s employment due to reasons like downsizing, poor performance, or policy violations.

Are there legal implications for businesses in the case of voluntary termination?

There could be, particularly if the terms of employment contracts are not adhered to. It’s advisable for businesses to seek legal counsel to ensure all processes are conducted within the framework of lawful practices.

Is there a standard process companies follow for voluntary termination?

Most companies have a policy in place for voluntary termination that usually requires formal notice from the employee, conducting an exit interview, and finalizing administrative tasks like final pay and benefits. The process can vary between companies and industries.

Related Finance Terms

  • Severance Package
  • Resignation
  • Release Agreement
  • Employee Rights
  • Unemployment Benefits

Sources for More Information

About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More