Customers could get up to �10 back

Standard compensation - a book of First Class stamps worth �3.36 - will be offered to customers from 6 October.

Cash payments will be introduced in the new year for people who can prove they have suffered severe delays.

Postal watchdog Postwatch described the move as a "welcome step" but said the measures did not go far enough.

Hefty sum

Royal Mail currently pays out �15m a year in "goodwill" compensation payments.

Compensation scheme From 6 October: A book of 12 First Class stamps worth �3.36 From January, 2004: Additional �5 for "exceptional circumstances" From January, 2004: �10 compensation for severe delays and next day service delays

But introducing a formal structure will cost the company an estimated �48m a year.

"It is right that customers get fairly compensated if we let them down," said Royal Mail chief executive Adam Crozier.

"But with Royal Mail's high volumes this will translate into a lot of money."

The compensation package has been agreed with Postcomm, the industry regulator.

As well as domestic customers, it will also offer payments to business customers who suffer delays.

The amount they get will depend on whether the Royal Mail meets its performance targets.

Sliding scale

From 6 October, the standard compensation package will be a book of 12 first class stamps, worth �3.36.

This will be offered to people who send first class letters that arrive more than four working days after posting, and for second class letters that arrive more than six working days after posting.

We have not achieved all we want but at last we have a block to build on Peter Carr, Postwatch

Standard parcels that arrive after more than 10 working days will also qualify for compensation.

Customers claiming will be required to give details such as the place and posting time - and the delivery address.

From January, customers who experience very severe delays will be able to claim more compensation.

For first class letters that arrive more than ten working days after posting, and second class mail and standard parcels that arrive after more 12 working days, customers will be able to claim �10.

Building blocks

Customers claiming these cash payments will be required to provide more evidence, including a copy of the envelope, and sign a declaration.

"Today's announcement is a welcome step forward," said Peter Carr, Postwatch chairman.

"We have not achieved all we want but at last we have a block to build on."

But Mr Carr said the compensation procedure fell short of expectations.

"Less than 6% of the complaints Postwatch receives are about delayed mail. Whereas lost and damaged account for a third of all customer complaints," he said.