Public sector exit payment reforms

The government has responded to a consultation about reforms to public sector exit payments.

In a bid to ensure greater consistency between public sector redundancy compensation schemes and value for money for the taxpayer, the reforms will apply to the majority of the five million public sector workforce, including civil servants, teachers, NHS workers, local government workers, armed forces personnel, police officers and firefighters.

The new framework ensures a fair and appropriate level of compensation is provided for employees who are required to leave public sector jobs, whether on a mutually agreed or voluntary basis, or through compulsory redundancy.

The government has already placed a cap on all public sector exit payments at £95,000, and ‘clawback’ of redundancy compensation when a highly-paid individual returns to the public sector shortly after receiving an exit payment.

The exit payment framework includes: a maximum tariff for calculating exit 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; and action to limit or end employer-funded early access to pension as an exit term.

The Treasury expects the necessary changes to be made within 9 months of the publication of this response.