Enhanced redundancy packages offer more than the statutory minimum, providing better financial support for employees leaving through redundancy.
What Is Enhanced Redundancy?
Definition
Enhanced redundancy means paying more than statutory minimum:
Element Statutory Enhanced (Examples) Per year calculation 0.5-1.5 weeks 2-4 weeks Weekly pay cap £700 Actual salary Maximum years 20 May be more Additional lump sum None £X,000
Why Employers Offer It
Reason Benefit Attract acceptance Voluntary redundancy Retain goodwill Reputation matters Policy commitment Part of package Negotiate exit Settlement situations
Types of Enhancement
Higher Multiplier
Statutory Enhanced Example 1 week per year (aged 22-40) 2 weeks per year 1.5 weeks per year (aged 41+) 3 weeks per year 0.5 weeks (under 22) 1 week per year
Removing the Cap
Statutory Enhanced Weekly pay capped at £700 Actual weekly salary High earners capped Full pay used
Example
Employee earning £1,000/week, 10 years' service, aged 45:
Calculation Statutory Enhanced (no cap) 10 years × 1.5 weeks 15 weeks 15 weeks Weekly pay £700 £1,000 Total £10,500 £15,000
Flat-Rate Enhancement
Approach Example Minimum payment "At least £10,000" Additional sum "Plus £5,000" Service bonus "£1,000 per year"
When Enhanced Pay Applies
Contractual Entitlement
You may have a right if:
Source Evidence Contract of employment Redundancy clause Staff handbook Policy statement Collective agreement Union negotiated Custom and practice Consistently applied
Discretionary Enhancement
Employer can offer:
During consultation
As part of settlement
For voluntary redundancy
Case by case
Voluntary Redundancy
Often comes with better terms:
Standard Voluntary Statutory only Enhanced package Selected by employer Volunteer Less control More control
Calculating Enhanced Pay
Example Schemes
Scheme A: Double multiplier
Element Calculation Years × 2 Instead of years × 1 No cap Actual salary
Scheme B: Flat addition
Element Calculation Statutory Calculated normally Plus £10,000
Worked Example
Employee: 45 years old, 8 years' service, £800/week
Statutory Enhanced (2× no cap) 8 × 1.5 = 12 weeks 8 × 3 = 24 weeks 12 × £700 = £8,400 24 × £800 = £19,200
Tax Treatment
The £30,000 Exemption
Payment Tax Treatment First £30,000 Tax-free Above £30,000 Taxed as income NI Not payable on redundancy
What Counts Towards £30,000
Included Not Included Statutory redundancy Outstanding salary Enhanced redundancy Holiday pay Ex gratia payments Contractual PILON Compensation for loss of office Benefits in kind
Example
Payment Amount Tax Enhanced redundancy £45,000 First £30,000 £30,000 Tax-free Remaining £15,000 Taxed as income
PILON Complications
Type Treatment Contractual PILON Taxed as earnings (outside £30k) Non-contractual May use £30k exemption
Negotiating Enhanced Pay
When You Can Negotiate
Situation Opportunity Voluntary redundancy Good scope Settlement agreement Standard practice Individual circumstance Case by case Selection dispute Leverage
What to Ask For
Element Request Higher multiplier Weeks per year Remove cap Actual salary used Additional payment Lump sum Extended notice Or PILON Other benefits Outplacement, reference
Leverage Points
Factor Strengthens Position Long service More to lose Key skills Harder to replace Disputed selection Risk to employer Age/protected characteristics Discrimination risk
Voluntary Redundancy Schemes
How They Work
Stage Process Announcement Scheme terms published Applications Employees apply Selection Employer chooses who to accept Acceptance Package agreed
Typical Terms
Element Common Provision Enhanced pay 2+ weeks per year No cap On weekly pay Minimum payment Floor amount Notice Full notice or PILON
Not Automatic
Employer can:
Refuse volunteers
Limit numbers
Select from applicants
Close scheme
Company Policies
Checking Your Policy
Look for:
Document Content Contract Redundancy terms Handbook Redundancy policy Intranet Policy documents Union agreement Collective terms
Policy Language
Wording Meaning "Will pay" Obligation "May pay" Discretion "Subject to" Conditions "At sole discretion" No guarantee
Settlement Agreements
Enhanced Pay in Settlements
Often includes:
Element Typical Content Statutory redundancy Confirmed Enhancement Agreed amount Other compensation Ex gratia Tax treatment Set out clearly
Benefits of Settlement
For Employer For Employee Certainty Better package No tribunal Legal advice paid Clean break Reference agreed
Practical Tips
Before Accepting
Action Why Calculate statutory Know minimum Check policy Know entitlement Understand tax Know take-home Consider negotiating Possible improvement
Questions to Ask
What's the total package worth?
How is tax calculated?
Is this negotiable?
What about notice pay?
Are there other benefits (outplacement)?
Documentation
Keep:
Calculation breakdown
Policy documents
Any correspondence
Final agreement
If Enhancement Is Refused
Options
Response When Appropriate Accept statutory No contractual right Negotiate Have leverage Challenge Policy not followed Tribunal If unfair selection
Contractual Claims
If policy not followed:
Breach of contract claim
Grievance process
Legal advice recommended
Frequently Asked Questions
What is enhanced redundancy pay? Enhanced redundancy pay is when an employer offers more than the statutory minimum redundancy payment. This could be a higher multiplier (e.g., 2 weeks per year instead of 1), removal of the weekly pay cap (£700), or a flat additional sum.
Is enhanced redundancy pay tax-free? The first £30,000 of total termination payments (including statutory and enhanced redundancy) is tax-free. Amounts above £30,000 are taxed as income. PILON may be taxed separately depending on whether it's contractual.
Do I have a right to enhanced redundancy? Only if it's in your contract, company policy, or established by custom and practice. Statutory redundancy is the legal minimum - enhanced pay is at the employer's discretion unless contractually promised. Disclaimer: This information is for general guidance only and does not constitute legal advice. Employment law is complex and changes frequently. For specific situations, consult ACAS, a qualified employment lawyer, or HR professional.