DEFINITION of 'Voluntary Termination'

1. An employee's decision to leave a job of his or her own accord.

2. The voluntary cancellation of personal financial contracts such as car leases or cell phone contracts

3. The voluntary cancellation of institutional level contracts such as credit default swaps and interest rate swaps.

BREAKING DOWN 'Voluntary Termination'

An employee may choose to leave a job for one or more reasons - changes in personal circumstances, dissatisfaction with working conditions, a hostile supervisor and so on. Another common reason for voluntary termination is a new and better job, typically one that offers higher remuneration or improved career prospects. This is more likely to be cited as a reason for leaving a job during periods of strong economic and job growth than during recessionary times.

Voluntary cancellation of financial contracts may or may not incur penalties. In case a penalty will be incurred, the party who wishes to terminate the contract may be able to rationalize the termination decision if the net benefit from terminating the contract is substantially larger than the penalty.

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