Consultation on reforms to public sector exit payments

08 February 2016

A consultation has been published to reduce the cost of pay-outs to ensure greater consistency between workforces across the public sector and also to align more closely with redundancy pay in the wider economy.

Currently, redundancy payments vary across the public sector, even for people with similar levels of pay and length of service. The proposals in the consultation will put pay-out terms between different workforces on a more equal footing, ensuring a fairer deal for public sector workers.

The new rules will also align currently generous public sector redundancy payments with those available in the wider economy. Research 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. The proposed changes will make public sector redundancy payments fairer, modern, and more consistent.

They will apply to all major workforces including the Civil Service, Teachers, NHS workers, local government workers, police offers and firefighters. The changes 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
  • 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
  • setting a salary cap for calculating exit payments which will be based on £80,000
  • reducing the cost of employer funded pension top ups for early retirement as part of redundancy packages.

This consultation will run for 12 weeks and close on 3 May 2016.