Government consults on tougher rules for public sector redundancy payouts

The Treasury is consulting on proposals to modernise public sector redundancy rules and bring them in line with private sector practice, which it claims could save hundreds of millions of pounds by 2020

Under the proposals on exit pay reform, first announced at spending review 2015, redundancy payments across the public sector would be standardised, with the government claiming current rules are inconsistent across different workforces.

The planned changes will apply to all major workforces including the Civil Service, teachers, NHS workers, local government workers, police offers and firefighters.

They include setting a maximum tariff to calculate exit payments at three weeks’ pay per year of service; capping the maximum number of months’ salary that can be used to calculate redundancy payments to 15 months; and introducing a tapering element that will reduce the amount of compensation lump sum an individual is entitled to the closer they get to their retirement age.

The Treasury also wants to set a salary cap for calculating exit payments which will be based on £80,000, and reduce the cost of employer funded pension top ups for early retirement as part of redundancy packages.

Greg Hands, chief secretary to the Treasury, said: ‘New guidance for public sector employers on pay and terms will set out what is acceptable and what isn’t. Taxpayers’ money shouldn’t be used to pay for private health insurance and gagging orders to cover up bad practice.’

The Treasury points to research which indicates that redundancy pay is higher in the public sector. Between 2010-11 and 2013-14, redundancy pay averaged £12,700 in the private sector compared to £15,800 in the public sector.

Hands has also written to all departments setting out new guidance on public sector pay and terms, bringing all the rules together into a single publication for the first time. Public sector workers must comply with the guidance which includes chief secretary approval of pay packages above £142,500, advice that confidentiality clauses should only be used in exceptional circumstances, and a ruling that taxpayers’ money should not be used to pay for private health insurance.

The consultation on the proposed changes to public sector redundancy payments closes on 3 May. Details are here

The updated guidance on public sector pay and terms is here

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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