Government reforms (2): Public sector exit payments – CAPS LOCK ON…

What do we already know?

We updated you in our September Newsletter Government reforms: Public sector exit payments – CAPS LOCK ON… on the Government’s proposal that exit payments to public sector workers should be capped at £95,000; its response to the consultation on this; and following legislation.

What’s new?

The Restriction of Public Sector Exit Payments Regulations 2020 came into force on 4 November 2020.

The Regulations impose a cap of £95,000 on exit payments made to departing public sector employees and office holders. This will apply to the majority of public sector employers, including the civil service, local Government, all academies and maintained schools, the NHS and the police. The full list of employers within scope is set out in the schedule to the Regulations.

The cap will apply in respect of most payments made to an individual on the termination of their employment, including statutory and contractual redundancy payments. Certain exclusions apply and there will be both mandatory and discretionary waivers in respect of certain payments and in certain ‘exceptional circumstances’.

Detailed guidance on the new Regulations and a Treasury Direction setting out the applicable rules for the waiver of the cap have been published by HM Treasury and are available here, here and here.

The guidance notes that public sector authorities should use the regulations in conjunction with the Treasury Direction when relaxing the £95,000 cap on exit payments. In case of any discrepancies between the regulations and the direction, the regulations should be followed.