What "enhanced" actually means
UK statutory redundancy pay (covered in detail here) is the legal minimum. Anything your employer pays beyond that minimum is enhanced or contractual redundancy — terms set by your employment contract, the staff handbook, or a separate redundancy policy.
Common structures:
| Enhancement type | Typical pattern | Notes |
|---|---|---|
| Higher weekly multiplier | 2, 3 or 4 weeks per year instead of 1–1.5 | Most common large-employer pattern |
| Removal of weekly pay cap | Full gross weekly pay used, no £719 ceiling | Important for higher earners |
| Removal of service-length cap | Counts all years, not just last 20 | Matters for long-service employees |
| Flat addition | £5,000–£20,000 lump sum on top of formula | Often used for senior roles |
| Long-service top-up | Extra week per year after 10 or 15 years | Recognises tenure |
| Notice pay enhancement | Longer-than-statutory notice (e.g. 6 months at director level) | Separate from redundancy pay itself |
Your enhanced terms may combine several of these. They may also be different for different staff grades — large employers often have separate redundancy policies for executive, senior management, and general staff.
Worked example — 10 years' service, age 45, £80,000 salary
Statutory floor:
- Weekly pay: £80,000 ÷ 52 = £1,538 → capped at £719
- 4 years aged 41+ (years 7–10): 4 × 1.5 × £719 = £4,314
- 6 years aged 22–40 (years 1–6): 6 × 1 × £719 = £4,314
- Statutory total: £8,628
Now apply three common enhancements:
Enhancement A — 2 weeks per year, no weekly pay cap: - 4 years × 2 × £1,538 = £12,304 - 6 years × 2 × £1,538 = £18,456 (treating all years equally at the enhancement) - Wait — typical enhanced schemes use a single multiplier ignoring statutory age bands: 10 years × 2 × £1,538 = £30,760
Enhancement B — 3 weeks per year, no caps, age bands preserved: - 4 years × 3 × 1.5 weeks × £1,538 = £27,684 - 6 years × 3 × 1.0 weeks × £1,538 = £27,684 - Total: £55,368
Enhancement C — Statutory + flat £15,000 long-service payment: - Statutory: £8,628 - Flat: £15,000 - Total: £23,628
These figures show why enhanced terms are worth reading carefully. The same employee can have wildly different offers depending on which specific enhancement pattern applies.
Where to find the enhanced terms
In rough priority order:
- Your contract — search for "redundancy" or "termination"
- Staff handbook — usually on the intranet under HR policies
- Separate redundancy policy — if your employer has formalised it
- Recent collective bargaining agreement if you're unionised
- A redundancy proposal letter — what's actually being offered now
If none of these mention enhanced redundancy in your case, the offer should be statutory. Don't accept verbal claims of "we usually pay X" without documentation — the proposal letter is the binding document.
The £30,000 tax-free threshold
Both statutory and enhanced redundancy pay sit inside the £30,000 tax-free threshold, combined. Above £30,000, the excess is taxed at your marginal rate (but not subject to National Insurance — that's the key difference from PILON, salary, and bonus).
Worked example — £45,000 enhanced redundancy at higher rate
- First £30,000 tax-free
- £15,000 above the threshold taxed at 40% (assuming higher-rate band) = £6,000 tax
- Net redundancy: £45,000 − £6,000 = £39,000 net
Worked example — £80,000 enhanced redundancy at higher rate
- First £30,000 tax-free
- £50,000 above the threshold taxed at 40% = £20,000 tax
- Net redundancy: £80,000 − £20,000 = £60,000 net
Note: a large redundancy payment can push you into a higher tax band for the year. A higher-rate earner receiving a £100,000 redundancy in the same tax year as £60,000 of salary has a total income of £160,000 — well into the personal allowance taper at £100,000–£125,140 and well into the additional rate band above £125,140. The marginal tax on different slices of the redundancy can vary substantially.
Read the full redundancy tax explainer →
Verifying an enhanced offer
Three checks before accepting:
- Re-derive the statutory floor. Use the redundancy calculator. Confirm the employer's statutory portion matches.
- Apply the enhanced multiplier to your actual gross weekly pay. If the contract says "2 weeks per year on full salary," verify the calculation uses your full weekly pay, not a capped figure.
- Cross-check for unstated elements. Holiday pay, accrued bonus, share scheme treatment, healthcare continuation — these are separate from redundancy pay and should each appear as a line item.
If the figures don't reconcile, raise it in writing immediately. Settlement-agreement offers are often the moment where errors get corrected; once signed, the figure is binding.
When enhanced offers come with a settlement agreement
For larger packages — typically anything materially above the statutory floor — employers often package the enhanced payment inside a settlement agreement. This is a binding legal contract where you accept the agreed sum in exchange for waiving certain employment claims.
Key points:
- Settlement agreements need independent legal advice to be binding. The employer usually pays a capped contribution (£250–£500 is common) toward your solicitor's fee
- The waived claims usually include unfair dismissal, discrimination, equal pay, and breach of contract — read the schedule carefully
- The "ex gratia" portion can sometimes be larger than the statutory or contractual minimum to compensate for the waivers
- Restrictive covenants (non-compete, non-solicit) may be included or released as part of the deal
Read more about settlement agreements →
When enhanced doesn't apply
Enhanced terms have eligibility rules. Common exclusions:
- Service length thresholds. Some schemes pay enhanced from 5 years' service; below that you get statutory only.
- Cause of redundancy. Some schemes don't apply for misconduct-adjacent redundancies (rare).
- Voluntary vs compulsory. Some schemes pay more for voluntary applicants; others pay less.
- Recent restructure participation. Some schemes exclude employees who declined previous redundancy offers.
Always check the eligibility clauses, not just the formula.
Common pitfalls
- Bundling notice with redundancy. Some employers describe the full package as "redundancy" but include PILON. PILON is fully taxable + NI'd; don't lose track of the breakdown.
- Stale policy documents. Enhanced redundancy policies change. The policy in force on your termination date is the one that applies — not whichever was in your starter pack.
- Multiple group entities. If your contract is with Company A Ltd but the redundancy is at Group level, terms can differ. Confirm which policy applies.
- Variable pay employees. Sales staff with heavy commission may find the enhanced "weekly pay" definition uses base only, not OTE. Read the calculation basis.
- Defined Benefit pension implications. If you're in a DB scheme and being made redundant near retirement age, redundancy may interact with the pension actuarial reduction — typically worth a specialist actuary review for senior employees.
What "ex gratia" means
You'll sometimes see "ex gratia" in offer letters. It means "by favour" — a payment the employer is making without legal obligation. Genuine ex gratia payments can be inside the £30,000 tax-free threshold (treated like enhanced redundancy) but the HMRC test is strict: it must be a genuine voluntary payment, not disguised salary or PILON.
In practice, modern HMRC enforcement treats most "ex gratia" payments as part of the termination package, applying the £30,000 threshold to the whole and taxing the excess. Don't rely on "ex gratia" framing alone to save tax — verify with the breakdown.
In short
Enhanced redundancy is whatever your employer offers above the statutory floor. Read the contract or policy that defines it. Verify the figure adds up arithmetically. Confirm the £30,000 tax-free threshold is being applied correctly across statutory + enhanced. And if the offer is meaningful and a settlement agreement appears, get independent legal advice before signing — it's almost always available at the employer's cost.