Government consults on expanded approval process for public sector exit payments

The Government has launched a consultation on a new approval system for public sector exit payments. It appears to have abandoned previous plans to impose a legal cap on the value of these payments, and to impose mandatory claw back of these payments where the employee finds a new job in the public sector within 12 months, although many public sector employers do currently operate with contractual claw-back provisions. Employers will very much be encouraged to include repayment provisions in the settlement package where appropriate.

Accompanying draft guidance proposes revisions to the current approval system. Public sector bodies will be required to obtain Treasury approval of any “special severance payment” – ie a termination payment which includes a discretionary element, over and above statutory and contractual entitlements, however small. In addition, public sector bodies will be required to obtain approval of plans to dismiss staff from the relevant Secretary of State where the total value of all elements in the termination package exceeds £95.000. Where these high value payments include a discretionary element, then Treasury approval will also be required.

In relation to high value exits the draft guidance explains:

“It is the intention of this framework that the contractual and statutory rights of employees are fully respected, therefore approval will focus on whether there is a viable alternative to employee exit. If an exit is agreed, the employer must fulfill all contractual and statutory obligations.”

Perhaps the most significant departure from the current arrangements (which have applied since short-lived regulations imposing a mandatory cap of £95,000 were revoked last year) is the section in the draft guidance which requires public sector bodies to consider including re-payment provisions when making special severance payments.

The consultation closes on 17 October 2022