Government reforms: Public Sector Exit Payments

What do we already know?

The Restriction of Public Sector Exit Payments Regulations 2020 (the Regulations) came into force on 4 November 2020.  For further information see our December 2020 Newsletter Government reforms (2): Public sector exit payments – caps lock on…

What’s new?

The Government has disapplied the exit payment cap and will be formally revoked in due course.

The Government has announced that after an extensive review of the application of the cap, it should be revoked as it may have had unintended consequences. The Regulations had been criticised and unions were seeking a judicial review on the basis that they had significant pension implications, in particular for long-serving public sector workers facing redundancy.

The Government has also published guidance (available here) stating that any employee who was affected by the cap while it was in force, should contact their ex-employer to request the amount he or she would have received had the cap not been in place.  Employers are encouraged to pay to any former employees to whom the cap was applied the additional sums that would have been paid but for the cap.

Comment

If you are approached by former employee/s about a termination payment that has been capped please do contact us for further advice, particularly if payments have been made following a Settlement Agreement or ACAS COT 3 Agreement.

Finally, public sector employers should note that the new guidance does state that “HM Treasury will bring forward proposals at pace to tackle unjustified exit payments”, so watch this space…