Cap on public sector exit payments

24 Sep Cap on public sector exit payments

The government has confirmed that it is to continue with plans to end six-figure exit payments in the public sector. This policy was first announced on 23 May 2015 and a consultation was published shortly afterwards seeking views from interested parties on the proposed cap.

The core elements of the proposal 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.

In a recently published summary of over 4,000 responses to the consultation a significant number of respondents were not in favour of a cap but there were few workable propositions to address the problem of six-figure pay-outs in the public sector.

A significant number of public bodies are expected to be exempt from the cap, including the public financial corporations and subsidiaries, public broadcasters, the Armed Forces and National Museums. However, we are told that the government's strong expectation is that bodies that are proposed to be outside of the scope of the cap on exit payments will come forward with their own, commensurate cap on exit payments.

The government has considered the responses and will press ahead to legislate to introduce a cap on exit payments. The proposals will be taken forward by taking powers in primary legislation as part of the Enterprise Bill, with implementation of the measure through secondary legislation.

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