Yahoo! employees will be in line for the improved payments if they are made redundant within two years of the company being acquired.
Executive officers qualify for two years' severance pay while the most junior employees will get four months wages. In addition, they can exercise any share options they have earlier than previously agreed.
Yahoo! said the plans were intended to help retain employees and put their minds at ease. However, the new initiatives do not benefit the 1,000 employees set to lose their jobs under cost-cutting plans announced on January 29.
Yahoo!'s move may frustrate Microsoft, which has previously said it could achieve $1bn in cost savings by buying Yahoo!.
It came as more noises emanated from the Microsoft camp about a proxy fight, which is the tactic of it replacing Yahoo!'s board of directors with its own nominees.
Microsoft would have to nominate its candidates by March 14 ahead of board elections to be held at Yahoo!'s annual shareholder meeting around June.
The Seattle-based software giant's $44.6bn offer for Yahoo! was made on February 1 and rejected by Yahoo! on February 11.