Enhanced redundancy, also known as contractual redundancy, is where those made redundant receive an additional rate on top of any statutory payments.

As well as an additional rate, employees may also be allowed to continue to use company benefits after termination, a termination payment for loss of office and payment for a discretionary bonus.

Who is Entitled to Enhanced Redundancy?

An entitlement to an enhanced redundancy payment should be included in contracts of employment. Sometimes, there will be a collective agreement negotiated between UCU and the employer which may be expressed as a policy.

However, occasionally there will be no mention in a contract or a relevant collective agreement. This means, it is open to an employment tribunal to explore whether an enhanced redundancy payment is payable.

Subject to the Equality Act 2010, this payment scheme does not unlawfully discriminate on grounds of age.

Why Are Enhanced Redundancy Payments Made?

Enhanced redundancy payments have been designed to help employees through the difficult transition between employment. Statutory redundancy pay may not cover expenses during this time, so enhanced redundancy will help support redundant employees on the search for a new job.

This payment scheme can also help employers show appreciation for longstanding employees and that they care for them even after they no longer work at the company. Plus, it’s another level of protection for ex-employees in the event of redundancy which improves staff wellbeing.

Can You Negotiate an Enhanced Redundancy Package?

Many employers offer an enhanced redundancy package from the start to ensure a smooth exit process and to protect themselves against failure to carry out the redundancy process correctly.

Employees are legally entitled to statutory redundancy pay and enhanced redundancy pay cannot be less than this. Whether this amount can be negotiated depends on whether it was a fair or unfair redundancy. If the redundancy is unfair, employees are entitled to negotiate the settlement agreement.

Is Enhanced Redundancy Pay Taxable?

Enhanced redundancy pay is not taxable up to £30,000. Statutory and enhanced redundancy pay are added together and if the combined total is below £30,000, it is tax-free. If the total is over £30,000, the payment will be subject to income tax and national insurance contributions.

When receiving final pay after leaving employment, tax will be taken from the redundancy pay at 20% unless a higher tax rate needs to be paid. Get in touch with HMRC to arrange this.

If you’re unsure whether you should have received enhanced redundancy pay, get in touch with our specialist employment lawyers who would be more than happy to help.