Public Sector Exit Payments
If you are in the public sector, a major potential reform that has been hovering over you for the past three years has been the introduction of a £95,000 cap on payments made to employees leaving their employment. This month the Government published new draft Regulations with Secretary of State Liz Truss putting out this quote:
"it is clearly wrong when people leave public sector roles with massive payoffs. It incenses the public when they see their hard-earned money being used badly like this. That's why we are capping exit payments to stop unacceptably large pay-outs for senior managers."
This is infuriating. As anyone working in the public sector knows, the cap on exit payments will not just hit senior executives who are being lavished with ex gratia payments when they leave their post. If the Government has its way, the cap will affect long-serving public sector workers who are made redundant from even moderately paid posts.
This is because as well as covering direct payments to the employee the payments that count towards the overall cap also include 'pension strain'. This is the payment that an employer has to make into a pension fund when an employee is made redundant at an age when he or she is entitled to take an unreduced pension (the age is 55 in the case of local government employees). The employee does not have to be a fat-cat for this element alone to exceed the 95K cap. The cost of pension strain depends on a multitude of factors including the age of the employee, his or her length of service and also the current state of the pension fund. It is not a sum paid directly to the employee. Not surprisingly, however, Liz Truss does not emphasise that her plan is to reduce the pension entitlement of middle-ranking public sector workers who are being made redundant.
There is no indication as yet of the timetable for the introduction of the cap, but it is clear that the current draft of the Regulations will not do. I explained some of the problems with the Regulations in my regular e-bulleting for West Midlands Councils and you can read what I had to say here. Essentially they have been rushed out ahead of the local government elections and before they could be checked properly. Given the changes that will clearly need to be made - possibly with further consultation - I can't see the change actually being made this year. With the political upheaval that we can expect in the next few months, it is difficult to see the Government really finding the time - but you never know.
For those interested, you can find the Government consultation here. Responses should be submitted by 3 July.