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Employment Law

Legal guidance - compliance - software

17 AUG 2015

Public sector exit payments - the end of the six figure payout?

Public sector exit payments - the end of the six figure payout?
Allison Cook
Senior Associate, Veale Wasbrough Vizards

In May, the government announced its proposal to introduce a cap of £95,000 on exit payments for public sector employees, following a review of the total cost of exit payments with the public sector.

A consultation has been launched to seek views on the scope, level and design of the cap. The key features of the proposal are to:

  • apply the cap to all exit payments available to public sector employees on leaving employment, including cash lump sums (such as redundancy payments), the cost of funding early access to unreduced pensions, and other benefits such as additional paid leave
  • apply the cap to all types of arrangement for determining exit payments. This will include voluntary and compulsory exits, formal redundancy schemes, collective agreements and contractual arrangements
  • exclude compensation payments in respect of serious ill-health and ill-health retirement and payments resulting from litigation for breach of contract or unfair dismissal from the cap
  • introduce a waiver of the cap with the consent of the relevant Minister, or where applicable, a decision of the full Council
The cap is intended to apply to all current and future employees and office holders of all central and local government departments and non-financial public corporations, as well as bodies where employment and remuneration practices are the responsibility of the UK government.

Certain public sector bodies including the BBC, the armed forces and other independent but publicly funding bodies, such as the Bank of England, will be formally excluded from the cap.

Organisations which are subject to the cap will be required to disclose records of all exit payments made during the financial year.

The consultation closes on 27 August 2015.
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