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Public sector workers to see exit payment calculation changes by summer 2017

Published 26/09/2016

The reforms will make the system for dealing with redundancies fairer, says the Government
The reforms will make the system for dealing with redundancies fairer, says the Government

Changes to the way exit payments are calculated for public sector workers will be in force by next summer, the Treasury has announced.

The Government insists the reforms will make the system for dealing with redundancies fairer across a range of occupations, even though the Treasury admits most of the responses it received during a consultation process were opposed to the moves.

The changes will impact on the bulk of the five million people in the public sector, including civil servants, teachers, NHS workers, local government employees, armed forces personnel, police officers and firefighters.

The Treasury said the new framework will ensure a "fair and appropriate level of compensation is provided for employees" who leave public sector jobs, whether on a mutually agreed or voluntary basis, or through compulsory redundancy.

The exit payment framework includes:

:: a maximum tariff for calculating such payments of three weeks' pay per year of service;

:: a ceiling of 15 months on the maximum number of months' salary that can be paid as a redundancy payment;

:: a maximum salary of £80,000 on which an exit payment can be based;

:: a taper on the amount of lump sum compensation an individual is entitled to receive as they get closer to their normal pension retirement age;

:: action to limit or end employer-funded early access to pension as an exit term.

The Treasury expects the changes to be in place within nine months.

It had already decided to put a cap on all public sector exit payments at £95,000, and introduce powers to claw back redundancy compensation when a highly paid individual returns to the public sector shortly after receiving an exit payment.

The Government is introducing the changes following a consultation process involving 350 employers, workers, and trade unions.

The Treasury said most of the responses voiced opposition to the changes.

" A wide range of views were expressed in these responses. The majority of responses expressed opposition to the Government's proposals.

"A smaller number of responses supported the principles of the Government's proposed reforms and some or all of the specific proposals.

"Exit payments will continue to be fair to employees and provide an appropriate level of support as a bridge into finding new work, or into retirement.

"Nevertheless, it is right to take forward the proposed reforms to cut the cost of redundancies, and to ensure greater consistency between schemes.

"The approach of individual workforce negotiations within an overarching framework strikes the right balance in ensuring fairness to the individual and the taxpayer, and ensuring that there is greater consistency between schemes while recognising the differences between workforces," a Treasury spokesperson said.

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