Public sector exit payments – Update

Sarah Lamont, Bevan Brittan

The draft Public Sector Exit Payments Regulations 2016 will introduce a cap of £95,000 on the pre-tax value of exit payments made to public sector employees. These regulations were expected to come into force this Autumn, but we have received confirmation that they will be delayed and subject to further consultation. It is now anticipated that the final regulations will be published and come into force in Spring 2017.

The ‘clawback’ regulations – allowing for recovering of public sector exit payments where a high-earning employee is re-employed in the public sector within 12 months of receiving a severance payment – are expected to be published in their final form and in force this year.

In addition to the new cap and clawback arrangements, the Government has published its response to its consultation on reform of public sector exit payments. The full response documentation can be viewed here. The new framework will require public sector employers to implement:

  • a maximum tariff for calculating exit payments of three weeks’ pay per year of service
  • a ceiling of 15 months on the maximum number of months’ salary that can be paid as a redundancy payment
  • a maximum salary of £80,000 on which an exit payment can be based
  • a taper on the amount of lump sum compensation an individual is entitled to receive as they get closer to their normal pension retirement age
  • action to limit or end employer-funded early access to pension as an exit term.

The Government has specified that it expects government departments to begin immediately producing proposals for implementing these changes, ready for consultation within three months, with a view to completing agreements within nine months, i.e. by June 2017.