Enhanced Redundancy Packages Explained

Statutory, contractual and discretionary: three different things

People use "enhanced redundancy" loosely to mean any offer bigger than the legal minimum. In practice there are three distinct categories, and which one you are in changes how much room you have to negotiate.

1. Statutory redundancy pay

This is the legal floor. If you have at least two years' continuous service and you are dismissed by reason of redundancy, you are entitled to it under section 135 of the Employment Rights Act 1996. It is calculated on a fixed formula:

• Half a week's pay for each complete year of service while you were under 22
• One week's pay for each complete year while you were 22 to 40
• One and a half weeks' pay for each complete year while you were 41 or over

Two hard limits apply. Only your last 20 years of service count, and a "week's pay" is capped. From 6 April 2026 that cap is £751, set by the Employment Rights (Increase of Limits) Order 2026. The maximum statutory redundancy payment is therefore 30 weeks at £751, which is £22,530. You can work your own figure out with the settlement agreement calculator.

The cap is the part that stings. If you earn £1,500 a week, your statutory redundancy pay is still calculated as though you earn £751. Someone on a good salary with long service can find the statutory figure bears almost no relation to what losing the job actually costs them.

2. Contractual enhanced redundancy pay

Some employers are contractually bound to pay more. The obligation might sit in your contract, in a staff handbook that is incorporated into your contract, in a collective agreement with a recognised union, or in a redundancy policy that has been applied so consistently over so many years that it has become an implied term through custom and practice.

This matters enormously. If the enhancement is contractual, it is not a gift and it is not conditional on you signing anything. It is a debt. An employer who offers you your contractual entitlement "in exchange for" signing a settlement agreement is offering you nothing at all, and that is a point worth making in negotiation.

3. Discretionary enhanced redundancy pay

Most enhanced packages fall here. The employer has no obligation to pay anything above statutory, but chooses to, because it wants a clean exit and a signed waiver of claims. This is the category where negotiation has the most room, because the figure was chosen rather than calculated.

What does a good enhanced redundancy package look like?

There is no legal answer, and be sceptical of any site that gives you a single number. What a package is worth depends on your salary, your service, your sector, the employer's finances and whether you have any claims worth settling. What I can give you is the structure that separates a genuinely good offer from one that just looks generous.

Test one: is it based on actual pay or capped pay?

This is the single biggest differentiator and the one most people miss. A scheme paying "two weeks per year of service" on the capped £751 figure is often worth less than a scheme paying "one week per year" on your actual salary. Always ask which basis is being used before you compare offers or celebrate a multiplier.

Test two: what is the multiplier, and is service capped?

Enhanced schemes are usually expressed as a number of weeks per year of service. Statutory is effectively one week per year for most of a normal career. Anything at or below that, on capped pay, is not an enhancement in any meaningful sense. Check separately whether the scheme caps the years counted, and whether it caps the total payout as a number of months' salary. A generous multiplier with a hard cap at six months can be worth less to a long-serving employee than a modest multiplier with no cap.

Test three: what is on top of the redundancy payment?

The redundancy element is only part of the package. Look for notice pay and whether it is paid in lieu, accrued but untaken holiday, any bonus or commission you have earned or would have earned, employer pension contributions during the notice period, continuation of private medical cover, outplacement support, retention of a company car or laptop, and the treatment of share options or long term incentive awards. These are frequently worth more in combination than an extra week per year on the redundancy multiplier.

Test four: what is the tax position?

A headline figure means nothing until you know what lands in your account. Genuine redundancy payments, including statutory redundancy pay, are generally free of income tax and National Insurance up to £30,000. Notice pay is different: post-employment notice pay is taxed as earnings whether or not it is described as compensation. Two offers with identical headline totals can differ by thousands once the split between compensation and notice is applied. The settlement agreement tax guide sets out how the £30,000 exemption and the notice pay rules interact.

Test five: what are you giving up?

An enhanced package is bought with your right to bring claims. If you have a strong claim, the enhancement may be poor value even if it looks generous in isolation. If you have no claim at all, a modest enhancement may be excellent value. This is the assessment a solicitor is actually doing when reviewing your agreement, and it is the reason a proper review is worth more than a signature.

Can you refuse an enhanced redundancy offer?

Yes. An enhanced package offered through a settlement agreement is an offer, not an instruction, and you are never obliged to sign. Refusing does not forfeit your statutory redundancy pay: if you are genuinely dismissed by reason of redundancy and you have the qualifying service, that entitlement exists independently of any agreement.

What refusing does mean is that the redundancy process runs its course. You stay in consultation, you may be offered suitable alternative employment, and if you are dismissed you receive your statutory entitlement and keep the right to bring a claim. Whether that is a better outcome than the offer depends entirely on how strong your position is. That is covered in more detail on what happens if you do not sign.

How to value the offer in front of you

Work through it in this order. First, calculate your statutory entitlement so you know the floor. Second, establish whether any part of the enhancement is contractual, because that is not really being offered to you at all. Third, add up everything outside the redundancy payment itself. Fourth, apply the tax treatment to get to a net figure. Fifth, and only then, ask whether the total is a fair price for giving up your claims.

Most people do this in the wrong order. They start with the headline number, decide whether it feels generous, and negotiate from a feeling. Starting from the floor and building up tells you what the enhancement actually is, which is the only basis on which you can sensibly negotiate a redundancy package.

Key points

• Statutory redundancy pay is capped at £751 per week from 6 April 2026, giving a maximum of £22,530
• Whether an enhancement is calculated on actual or capped pay usually matters more than the multiplier
• Contractual enhancements are a debt, not a concession, and should not be traded for your signature
• Discretionary enhancements are chosen rather than calculated, which is exactly why they move
• Compare net figures, not headline figures: the split between compensation and notice pay changes the tax
• Refusing an offer does not forfeit statutory redundancy pay