Public Sector Exit Payments: government response to consultation

11 November 2015

HM Treasury has published their response to the consultation on capping public sector redundancy payments and has said that they will pursue a £95,000 cap on payouts in legislation.

In May 2015 the government announced that redundancy payments for the best-paid public sector workers will be capped below six figures as part of the Enterprise Bill.

The core elements of the proposals within the consultation were to:

  • Apply a £95,000 cap on the total value of exit payments made to employees in the public sector
  • Apply the cap to all forms of exit payment, including cash lump sums, early access to an unreduced pension, payments in lieu of notice and non-financial and other benefits
  • Apply the cap to all types of arrangements for determining exit payments
  • Establish a waiver process for exceptional circumstances
  • Apply the policy to all public sector bodies, with a small number of bodies granted an exemption from the policy.

The response in summary:

  • The government has consulted on a £95,000 level for the cap given the commitment to end six-figure payouts in the public sector. Given there were few responses suggesting an alternative cap level, the government will pursue a £95,000 cap on payouts in legislation as it believes this best meets the policy intention of ending six-figure exit payments in the public sector. Individual schemes will have the flexibility to set a lower limit where it is more appropriate to do so.
  • The government’s intention is to keep the level of the cap under review and retain the flexibility to make changes in response to changing circumstances to ensure that the impacts of the cap remain proportionate.
  • Should the government decide to change the level of the cap, Regulations will be made following an affirmative procedure to allow for full parliamentary scrutiny of the potential impact.
  • The cap does not replace other arrangements for determining the level of exit payments in the public sector where these are below the level of the cap. Where other criteria or methods are used to cap exit payments, such as a maximum salary for the purpose of calculating compensation, these will remain unaffected, and the cap will apply after any other reductions.
  • Finally, legislation will extend to contractual compensation arrangements to ensure all forms of public sector exit payments fall under the scope of this measure.

The full response is available on GOV.UK - Response to the Public Sector Exit Payments consultation

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