Justice Minister David Ford has published the details of a £20m gratuity scheme for members of the Police Part-Time Reserve.
The money is being provided by the Treasury.
It is part of the government's financial deal for the devolution of policing and justice.
Mr Ford said that the "payments are to be made in recognition of the particular circumstances of those who volunteered to serve" in the reserve.
BBC NI Home Affairs Correspondent Vincent Kearney said: "A special fund to recognise the service provided by part-time members of the RUC and PSNI was a key demand of the DUP during negotiations about the transfer of policing and justice powers to the assembly.
"The Treasury agreed to provide £20m for the payment and administration of the scheme, which could benefit thousands of former police reservists and their families."
It will be open to former members of the RUC Part-Time Reserve, and current or past members of the PSNI Part-Time Reserve who joined before the end of October last year.
The surviving spouse or partner of a deceased officer may also be eligible to apply.
The closing date for applications is 4 February next year.
Announcing the details of the scheme on Monday, Mr Ford said that "gratuity payments are to be made in recognition of the particular circumstances of those who volunteered to serve in the Police Part-Time Reserve".
He said that they had "made themselves vulnerable within the community for the safety of others, with the accompanying risks and the demonstration of civic spirit which that volunteering exhibited."
On Monday, UUP councillor Ross Hussey said that the announcement was "most welcome".
Mr Hussey is also chairman of the RUC GC Association Part Time Officers Welfare Group.
He said that "it has taken a long time but the battle has been won".
"We have achieved a scheme that in a small way recognises the service and commitment of part-time police officers in Northern Ireland," he added.