Public-sector redundancy pay to be capped at £95,000

The cap on redundancy pay for public-sector workers will be set at £95,000, the Government has confirmed.

The proposal to limit “taxpayer-funded, six-figure payoffs in the public sector” is a key part of the Government’s Enterprise Bill.

Public-sector accounts published in March showed that £1.8 billion had been paid in public-sector exit payments in 2013/14.

A total of 1,838 payments of more than £100,000 were made during this period.

Under the new provisions in the Enterprise Bill, public-sector workers’ exit payments will be limited to £95,000.

The rules will cover all types of exit payment, including payments for voluntary as well as compulsory redundancy, and other severance payments.

The amount could include a cash lump-sum, or an employer-funded contribution to access a pension early.

The £95,000 cap will also include any pay in lieu of notice, to “ensure that the cap is not circumvented by excessive notice periods which are then paid in addition to any exit payment”.

XpertHR principal employment law editor Stephen Simpson commented: “The key point for public-sector employers to take from this is the breadth of different payments that will be covered under the cap. It will include not only regular compulsory redundancy payments, but also voluntary redundancy payments, pay in lieu of notice and pension top-ups.

“Once the Enterprise Bill receives Royal Assent, further detailed regulations will be needed to set out the detail of what payments will be covered.”

The cap will sit alongside reforms being introduced via the Small Business, Enterprise and Employment Act 2015 to allow public-sector employers to claw back exit payments made to high earners who return to the same part of the organisation within 12 months.

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The Enterprise Bill also introduces new apprenticeship rules. A new criminal offence will be created of providing or offering training as an apprentice that does not meet the definition of a statutory apprenticeship.

No date has been set for the introduction of these changes.