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Employment Law

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Veale Wasborough Vizards , 16 NOV 2015

Draft regulations published for the public sector exit payment cap

Draft regulations published for the public sector exit payment cap
Allison Cook
Partner, Veale Wasbrough Vizards

The government has now published the draft Public Sector Exit Payment Regulations 2016 (Regulations), which follow the government's recent response to its consultation on the public sector exit payment cap.

We recent reported on the government's plans to introduce a cap of £95,000 on exit payments made within the public sector.

As previously reported, the cap, notwithstanding representations made as part of the consultation process, will include the employer's cost of funding early access of unreduced pension. This is likely to have a significant impact on how settlement arrangements are determined.

As things stand, it is not clear to what extent the government will exercise its waiver in circumstances where the pension costs either exceed the cap or make up a significant part of it, leaving the employer potentially unable to meet the costs of contractual and/or statutory liability on the termination of an individual's employment.
The Regulations will be made under a new section within the Small Business, Enterprise and Employment Act 2015, to be inserted by the Enterprise Bill 2015-16. The draft Regulations have been published for illustrative purposes. The government plan to publish a further version of the Regulations after the Enterprise Bill receives Royal Assent. You can view the Regulations here.

Best practice

Now is the best time for employers within the scope of the Regulations to review their exit payment policies and make adjustments where necessary.

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