• The Government has launched a consultation entitled “Recovery of Public Sector Exit Payments” following a pledge to clamp down on high paid public sector employees receiving generous redundancy and other exit packages and then returning to the public sector soon after whilst keeping their payments. The consultation document contends that whilst redundancy and other exit payments have played an important part in facilitating reforms to improve public services and reducing unnecessary bureaucracy, allowing recovery will promote fairness and value for money for the taxpayer.

    This article examines some of the questions raised by the consultation document and looks at the proposals put forward by the Government.

    What is the concern?

    A number of recent high profile cases have highlighted that some individuals have received significant payments and then quickly returned to a role within the public sector.

    For example, a recent report by the Health Select Committee has suggested that among 19,000 redundancies within the NHS, 17% of those individuals had been rehired and most of those within a year.

    Whilst it is recognised that a number of workforces already have arrangements to recover some or all exit payments where an employee returns after a short period, such provisions are not universal. The proposals being considered by the government seek to establish some national rules to underpin individual employer’s policies and will not replace existing policies which go further than these proposals.

    What are the proposals being consulted on?

    The government is proposing that:

    • High earning public sector employees (defined as those earning £100,000 or above) would repay exit payments in full if they return to the public sector within 28 days or on a pro-rata basis if they return after 28 days but within 12 months. After 12 months, there will be no requirement to repay an exit payment.
    • The measures are applied to employees moving between the same section of the public sector – with the definition of each section to be clarified through the consultation process.
    • A taper would apply for those earning between £100,000 and around £80,000. Recovery of exit payments below the lower threshold would continue to be determined by the employer or through national contracts.
    • Recovery provisions will be applied to both lump sum payments and any benefits to employees who are offered early access to pension.
    • Where employees have an existing contractual right to compensation, the government would be given power to enable the variation of existing contractual terms which contradict with their policy proposals.
    • In exceptional circumstances, the recovery provisions may be waived.

    Who will they apply to?

    It is proposed that they will apply across as much of the public sector as possible, with few exceptions. Currently, the Government is suggesting excluding the Armed Forces and some public financial corporations such as The Royal Bank of Scotland and Northern Rock Asset Management.

    What types of payments will be recoverable?

    The provisions are intended to apply to a wide range of payments including redundancy payments (both voluntary and compulsory), discretionary payments made to buy out reductions in pensions, ex-gratia payments, special severance payments, contractual compensation payments and payments in lieu of notice.

    Exit payments made in respect of injury caused by the employment, serious ill health and ill health retirement will be excluded.

    When is a decision likely to be made?

    The consultation is published until 17 September 2014, with the intention that any measures are implemented thorough primary legislation by April 2016 at the latest. The final deadline will be decided following the consultation.

    The proposals set out are in an early stage, and the end result may well be different from the initial suggestions put forward in the consultation document. We will keep you updated as we keep a close eye on further developments.

    This content is correct at time of publication

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