WHEN chief executives mess up they seem to come out of it rather well. Take Adam Applegarth, the former head of Northern Rock who left the bank when it was in deep trouble and yet still managed to walk - or possibly run - away with a £760,000 golden handshake. Those much lower down the pecking order will certainly be far worse off when the bank makes some 2,000 staff redundant, as is expected.

Whatever the economic warning signs, few of us are ever really prepared for the axe. Employees tend to look on the bright side when they join a company and fail to ask searching questions about what they are entitled to should they should lose their job. Companies too are reluctant to advertise redundancy terms; in part because the subject is likely to make new starters nervous, while the more savvy firms prefer to keep such matters out of contractual negotiations and so leave redundancy to custom and practice. This gives careful employers the opportunity to change or withdraw terms according to business needs, but makes it difficult for employees to know exactly where things stand when it comes to a payout.

Statutory redundancy payments are far from generous and depend on an employee’s age, length of service and weekly pay. In spite of recent legislation intended to prevent age discrimination, a worker aged 41 years or over is entitled to three times more than a worker aged 21 or under, for example. This is justified because older workers are likely to find it much more difficult to find another job and are likely to have to take a pay cut to do so, according to the Department for Business Enterprise and Regulatory Reform. Regardless of how old you are, however, the present weekly limit for statutory redundancy pay is only £330 - so even if your weekly take-home pay is actually far higher, you could have to settle for a payout based on a multiple of this lower amount.

Beyond your personal circumstances, how much you receive could depend on your employer's generosity and the sector that you work in, says Michael Leftley, a partner in employment law at Addleshaw Goddard, a corporate law firm. “A lot of organisations operate enhanced redundancy schemes beyond the statutory scheme, but they tend not to express them contractually,” he says. “It’s pretty common to have the week’s pay uncapped, so to follow the statutory scheme but not to have the cap on a week’s pay [currently at £330].

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“Banks aren’t bad in as much as they tend to operate discretionary redundancy schemes and, usually, it will be a week’s pay uncapped per year of service and sometimes it is better than that,” he says. Newer sectors, for example technology, are less likely to offer a payout above and beyond the statutory scheme because practices are less evolved. Leftley has seen the biggest payouts in more traditional sectors. “The best schemes I have seen have been an uncapped month’s pay per year of service,” he says. “So effectively after 12 years you are looking at a redundancy payment equivalent to one year’s salary in addition to notice. I’ve seen that probably on half a dozen occasions in the [big] pharmaceutical sector and more traditional manufacturing businesses as well.”

Almost four small businesses out of ten expect to have to lay people off thanks to rising costs, according to a recent survey by the Federation of Small Businesses (FSB). This is bad news for the 13 million people working in small firms because employers tend to stick to the statutory formula when it comes to working out redundancy pay, says Stephen Alambritis, the head of public affairs at the FSB. “The default for small businesses is the statutory limit on sick pay and redundancy,” he says. “We estimate that 90 per cent of small businesses would stick to statutory guidelines. They may want to have a more luxurious redundancy package - to become an employer of choice - but that would be more expensive.”

But money isn’t everything, says Graham Brown, the assistant editor of IDS HR Studies, an online information service. Some firms take care to help employees find new positions and that assistance can be very valuable. “It’s not just about pay, it’s also [about] skilling people up,” he says. “In a lot of organisations people have been with the company 15 or 20 years and they may not have updated [their CV} for quite a long time. So, in many ways, securing future employment is more important than getting a good payoff.”

That kind of assistance will be of little comfort to the 2,964 claimants who took their employers to an Employment Tribunal over redundancy pay in the year to March, 2007, according to figures from Acas, the employment relations service. Women who have recently switched from full to part-time work are also likely to feel that their redundancy cheque is mean.

“Almost without exception, all schemes are based on final salary, which disproportionally affects women,” Leftley says. “You could be in a situation where you have worked ten years for an organisation, but you have had children towards the end of that period so you have moved from five days a week to three or two days a week. You [may] have done only a year at two days a week but your entire redundancy package will be calculated on that two-day-a-week salary. It’s not based pro rata on full-time service and part-time service, so women can really lose out,” he says.

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