Exit Package

Working out what a redundancy package is worth

A redundancy offer is several separate entitlements added together, and they are governed by different rules. Separating them tells you which parts are guaranteed, which are negotiable, and how long the money actually lasts.

How it works

• Totals notice pay, statutory or contractual severance, and accrued untaken leave.
• Converts the total into months of runway at your actual spending rate rather than your salary.
• Keeps the components separate, since notice and severance are treated differently in law and often in tax.

package = notice months + severance months + accrued leave

monthly = annual salary ÷ 12
daily   = annual salary ÷ 260

runway months = package ÷ (monthly × spending rate)

Worked example

A 90,000 salary with five years' service: three months' notice, two months' severance, six days of untaken leave, spending at 70% of net monthly pay.

1. monthly = 90,000 ÷ 12 = 7,500
2. notice and severance = 5 months × 7,500 = 37,500
3. leave = 6 × (90,000 ÷ 260) = 2,077
4. package total = 39,577
5. runway = 39,577 ÷ (7,500 × 0.70) = 7.5 months

39,577 in total, which funds about seven and a half months at a reduced spending rate — considerably longer than the five months of salary it nominally represents.

Reading the result

• Notice pay and severance are different things. Notice is what you would have earned working out your period; severance compensates for the job ending. Statutory severance usually scales with length of service, and contractual terms can exceed it but rarely fall below.
• Tax treatment differs between the components and between countries — some severance is partly exempt while notice pay is taxed as ordinary income. Check the net figure rather than assuming the gross is what arrives.
• Garden leave is not the same as pay in lieu. On garden leave you remain employed, which usually means benefits continue and you cannot start elsewhere; pay in lieu ends the employment immediately and frees you to take another role.
• The negotiable parts are usually the reference, the announcement wording, outplacement support, and occasionally an extra month. The statutory minimum is not negotiable downwards and you should not accept less.

Common questions

Should I sign the agreement straight away?

No. Ask for time and, where the sums are significant, take advice — many jurisdictions require the employer to contribute to your legal costs for a settlement agreement. Signing waives claims, so it is worth understanding what you are giving up before the deadline pressure builds.

How long will the money actually last?

Longer than the headline months, if your spending falls. In the example, five months of salary funds seven and a half months at 70% of normal outgoings. Working out that runway figure first tends to make the job search calmer and the negotiating position stronger.