Newsflash: Reforming public sector exit payments – consultation

compensatory award - scales balancing person and moneyWhat do we already know?

We updated you in our October 2015 Newsletter Government reforms (1): Cap on exit payments that the Government plans to cap exit payments made to public sector workers at £95,000 in reforms which are most likely to take effect in October 2016 or later. We also updated you that the Government had published its response to the consultation on the exit payment cap.

What’s new?

The Government has published a new consultation, available here, on reforms to public sector exit payments. This time the Government is seeking views on options to make public sector exit compensation terms fairer, more modern and more consistent. The consultation closes on 3 May 2016.

The Government proposes to:

  • Cap the maximum:
    • for calculating exit payments at three weeks’ pay per year of service;
    • number of months’ salary that can be used when calculating redundancy payments up to 15 months; and
    • salary for the calculation of exit payments.
  • Taper the amount of lump sum compensation an individual is entitled to receive as they get close to the normal pension age or target retirement age of the pension scheme to which they belong, or could belong, in that employment.
  • Reduce the cost of employer-funded pension top up payments, such as limiting the amount of employer funded top ups for early retirement, or removing access to them and/or increasing the minimum age at which an employee is able to receive an employer funded pension top up.

The Government is also currently consulting on the reform of the Civil Service Compensation Scheme as part of the consultation on public sector exit payments.