Anger at cap on ‘exit payments’

11 Apr 19

Treasury plans to cap public sector exit payments have sparked anger from unions.

Payoffs to some local government staff, civil servants, police and NHS workers leaving their roles – including those for redundancy – would be capped at £95,000 under the proposals.

The FDA union and the Association of Local Authority Chief Executives and Senior Managers have both expressed concern about the plans.

Chief secretary to the Treasury Liz Truss said: “It is clearly wrong when people leave public sector roles with massive payoffs. It incenses the public when they see their hard-earned money used badly like this.

“That’s why we are capping exit payments to stop unacceptably large pay-outs for senior managers.”

The government said that in 2016–17 English local government six-figure payments alone accounted for £98m worth of exit payments alone, while the total across the public sector was £1.2bn.

The exit payment cap includes redundancy lump sums and pension top-up payments.

Dave Penman, FDA union general secretary, said: “Public sector workers, like any group of workers, deserve decent terms and conditions. The government is making people redundant, this isn’t some kind of voluntary process for public sector workers looking for big cash pay outs.

“The government are making these people redundant and, at times, when people get those redundancies or get early payments of pension, it can reach these sorts of figures.”

Ian Miller, honorary secretary of the Association of Local Authority Chief Executives and Senior Managers (ALACE), noted that “pension strain” is included within the cap – when there is a cost to employers if an employee leaves a post early.

This would see an employee’s pay out include cost of the strain, thus reducing it.

Miller said: “Our principal concern remains the suggestion that the cost of pension strain should count towards the £95k cap. This would affect many council staff who face redundancy above the age of 55, not just high earners. Under the local government pension scheme regulations, it is mandatory for councils to pay the cost of pension strain in these cases and there is no choice for the employee.

“The cost of pension strain is not cash in an individual’s pocket in the same way as a redundancy or compensation payment. Nor does it give anyone a pension that is higher than the entitlement they have earned.

“We therefore feel strongly that pension strain should be omitted altogether. At the very least, its ‘cash value’ to the individual should be assessed by applying an appropriate divisor as the pension will be received over many years, not in a single lump sum.”

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