Pay-off rules give more power to Section 151 officers

28 Nov 22

Recent guidance on severance pay gives CFOs a clearer role in finalising exit agreements.


At a time when the public purse is under intense pressure and the nation faces a cost-of-living crisis, it is important that local communities can trust the stewardship provided by elected officials and officers.

One of the topics that is always likely to draw attention in the public sector is when senior staff leave and are given what is perceived to be a golden handshake. Irrespective of context, the size of the agreed payments can often draw criticism and condemnation.

For a number of years, the government has been trying to manage expectations and – while previous attempts have failed – they now seem to be more successful.

In May 2022, the government issued guidance on the making and disclosure of special severance payments. For Section 151 officers in particular, this guidance forms part of the best value regime for local authorities in England.

It requires that an authority “must make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness”.

This will focus the mind of chief finance officers, who will be well aware of their responsibilities with regard to best value. With this new guidance, the government has not left those in the finance community in any doubt as to the need for Section 151 officers to be involved.

It states: “As part of their duties, an authority’s S151 officer, and where appropriate, the monitoring officer, should take a close interest in and be able to justify any special severance payments that are made by that authority and, in particular, any payments made that are not consistent with the content of this guidance.”

Not only does the new guidance link specifically with best value but there is also a prescribed arrangement for settlement payments approval set out in paragraph 5, which states: “Payments of £20,000 and above, but below £100,000, must be personally approved and signed off by the head of paid service, with a clear record of the leader’s approval and that of any others who have signed off the payment.”

We can make an educated guess that the publication of new guidance will be inevitability followed by an increased interest by local auditors. Therefore, Section 151 officers should not only be aware of the new guidance but also of relevant recommendations made on the subject.

Grant Thornton, the local auditor for South Somerset District Council, published a statutory recommendation related to an employment settlement recently. It noted that “there was a lack of due process, insufficient records were maintained to evidence how the agreement was reached and that the agreement does not reflect value for money”. Subsequently, the report went on to make a number of recommendations, including:

  •  Ensuring that appropriate consultation takes place with the statutory officers;
  •  Clearly demonstrating that value for money has been achieved.


While this will not be a priority for many authorities, it could prove to be sensible for the Section 151 and monitoring officers to carry out a light-touch review of current processes, taking into account the new guidance, and to make any amendments ahead of a visit from their auditor.

Image credit | Getty

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