A while ago I wrote about Peacocks stores becoming liable to pay enhanced redundancy payments and the risks of employees becoming entitled to payments as a matter of custom and practice: http://www.refreshinglawltd.co.uk/?p=282. In Shumba v Park Cakes Limited 2013 the court has focussed less on what the employer’s intention is when making payments and more on how the situation would reasonably appear to the workforce. This highlights how important it is to choose your words carefully: if something is described as ‘discretionary’ or ‘ex gratia’ then it is hard to see, accoridng to Lord Justice Underhill, how employees could reasonably understand the payments being made as contractual, however regularly those payments are made. That can be contrasted with the use of words like ‘entitlement’ in letters which would suggest payments were contractual.
The word ‘policy’ is more of a grey area – the judge in the case felt that it didn’t necessarily suggest a contractual commitment but this will depend on the context: my suggestion would be to avoid using it when discussing enhancements to redundancy pay – stick to ‘ex-gratia’ instead.