By Team SalaryCalculate · 9/23/2025
While statutory redundancy pay provides a legal minimum, many employers offer enhanced severance packages that can significantly boost your financial cushion during job loss.
This comprehensive guide explains what enhanced severance packages typically include, from performance bonuses to long service awards, and how to ensure you receive the best possible terms.
Understanding Severance Packages
A severance package is the total compensation you receive when leaving employment through redundancy. Use our redundancy severance calculator to work out exactly what your total package should include, from basic statutory pay to enhanced benefits.
A complete severance package typically includes:
| Component | Description | Typical Value | Notes |
|---|---|---|---|
| Statutory redundancy pay | Legal minimum based on age, service, and pay | £571 per week × years of service | Required by law |
| Notice pay | Payment for notice period | Full salary for notice period | Can be paid in lieu |
| Enhanced redundancy | Extra pay beyond statutory minimum | 1.5x to 3x statutory | Company discretion |
| Performance bonus | Bonus for good performance | 5-20% of annual salary | Based on performance reviews |
| Long service award | Recognition for years of service | £500-£5000 | Usually for 10+ years |
| Garden leave | Paid leave during notice period | Full salary | May include restrictions |
| Outplacement support | Career transition assistance | £2000-£10000 | Professional coaching |
Enhanced Redundancy Packages
Enhanced redundancy packages go beyond statutory minimums and are often negotiated as part of the redundancy process. Learn more about enhanced redundancy packages and what factors influence their value.
Enhanced packages are more likely when:
• You have long service with the company
• You've consistently performed well
• The company is financially stable
• You're in a senior or specialist role
• The company wants to avoid disputes
Performance-Based Bonuses
Performance bonuses in redundancy packages reward your contributions to the company. Understanding redundancy performance-based packages can help you negotiate better terms based on your track record.
Performance bonuses typically consider:
• Recent performance reviews and ratings
• Achievement of targets and objectives
• Contributions to team and company success
• Special projects or initiatives led
• Client relationships and business development
Long Service Awards
Long service awards recognize your loyalty and commitment to the company. These are typically paid in addition to statutory redundancy and can significantly boost your package.
Common long service award levels:
• 5-9 years: £500-£1,500
• 10-14 years: £1,000-£3,000
• 15-19 years: £2,000-£5,000
• 20+ years: £3,000-£10,000+
Garden Leave
Garden leave means you're paid to stay away from work during your notice period. You continue to receive full salary and benefits but don't need to attend the office.
Garden leave benefits:
• Full salary during notice period
• Continued benefits (pension, health insurance)
• Time to job search without pressure
• Maintained employment status
However, garden leave often comes with restrictions:
• Cannot work for competitors
• Must be available for consultation
• Cannot contact clients or suppliers
Pension and Benefits Considerations
Severance packages often include pension considerations. Use our redundancy pension calculator to understand how your severance package affects your retirement planning.
Key pension points in severance:
• Employer contributions continue until last working day
• Enhanced packages may include pension top-ups
• Garden leave extends pension contribution period
• Consider pension transfer options for new employment
Outplacement Support
Many enhanced severance packages include outplacement support - professional assistance with finding your next role. This can be worth thousands of pounds and significantly improve your job search success.
Outplacement services typically include:
• CV writing and interview coaching
• LinkedIn profile optimization
• Networking and industry connections
• Career transition planning
• Access to job boards and recruitment agencies
Negotiating Your Severance Package
Many employees don't realize that severance packages are often negotiable. Learn effective strategies for redundancy settlement negotiation to maximize your package value.
When negotiating, consider asking for:
• Higher enhanced redundancy multiplier
• Extended garden leave period
• Additional outplacement support
• Continued health insurance
• Positive reference letter
Tax Implications
Understanding the tax treatment of different severance package components is crucial for planning. Use our redundancy settlement calculator to see the tax implications of your total package.
Tax treatment of severance components:
• Statutory redundancy pay: Tax-free up to £30,000
• Enhanced redundancy: Tax-free up to £30,000 total
• Notice pay: Taxed as normal income
• Performance bonuses: Taxed as normal income
• Long service awards: Usually tax-free
Frequently Asked Questions
Q: Are severance packages negotiable?
A: Yes, many employers are open to negotiating enhanced terms, especially for valued employees or to avoid disputes. It's worth asking for improvements to the package.
Q: How much should I expect in an enhanced package?
A: Enhanced packages typically range from 1.5x to 3x statutory redundancy pay, plus additional benefits like outplacement support, garden leave, and performance bonuses.
Q: What's the difference between garden leave and pay in lieu of notice?
A: Garden leave means you're still employed but don't work, maintaining benefits and pension contributions. Pay in lieu is a lump sum payment that ends employment immediately.
Q: Should I accept the first severance offer?
A: Rarely. Most employers expect some negotiation and build this into their initial offer. Take time to review the package and consider what additional benefits would help your transition.
Enhanced severance packages can significantly improve your financial position during redundancy. Understanding what's typically included and how to negotiate better terms can make a substantial difference to your transition.
Remember: redundancy is a business decision, not a reflection of your value. A good severance package recognizes your contributions and helps you move forward with confidence.
