New redundancy and retirement packages based on length of service rather than age have been agreed by the Department of Health.
NHS Employers drafted the proposals in line with age discrimination legislation introduced last month. They were agreed by health minister Lord Warner last week.
The main changes mean that all employees made redundant on or after 1 October will receive a flat rate of one month's pay per year of service with a maximum of 24 months.
Under current terms, the number of weeks salary paid out increases with age: with half a week per year for staff aged 18-21; a week per year for those aged 22-40; and two weeks salary for every year worked prior to 41, plus a month for every year after for all those aged 41 or over.
Under the new terms, staff over the minimum pension age of 50 will still be able to retire early on redundancy with no reduction in the value of their pension; staff will also be able to take early retirement without the value of their pension falling.
Transitional protection will be provided for existing staff over 50 who are entitled to added years on their pension when they are made redundant. This protection will reduce over five years, ending in September 2011.
NHS Employers lead pensions negotiator Tim Sandson acknowledged that the initial transitional costs of moving to the new arrangements would be 'unwelcome' for rusts.
'We accept that at the beginning of the transition, redundancy costs are likely to rise. However, we have to consider the new legal requirement and there is a greater financial risk to trusts if they don't comply with this requirement,' he said.