Civil service severance pay must be refunded if staff are re-employed

Ex-civil servants who return to work in the Civil Service after receiving a severance payment will have to pay the cash back, under tough new government rules.

Officials are also exploring the feasibility of extending the policy to include anyone who returns to work as a consultant for the Civil Service.

The reforms aim to avoid a repeat of the situation at the Equality and Human Rights Commission, where seven senior staff took generous early severance packages only to be re-employed as consultants weeks later – at a total cost of nearly £1m.

Cabinet Office reforms of the Civil Service Compensation Scheme (CSCS) – aiming to save up to £500m over the next three years – also put a cap on the amount of compensation paid out, and require all Whitehall departments to follow the same rules on redundancy payments.

Anyone made compulsorily redundant will receive cash compensation of up to two years’ pay. For the lowest paid, cash payments will be capped at three years’ pay or £50,000, whichever is lower. Officials say this protects the 60% of civil servants who earn less than £25,000 a year. The minimum qualifying period for redundancy payments will also be increased from one to two years.

However, the PCS union, representing Whitehall staff, said it was “outraged” that these announcements had been made while a meeting about the changes was being held with the union at the Cabinet Office, and also threatened legal action to stop the changes.

A union statement said: “No attempt has been made to reach an agreement despite previous ministerial commitments that talks would take place. This displays bad faith and a shocking lack of respect for civil service staff. The PCS national executive will meet next Tuesday to consider our response.”

Cabinet Office minister Tessa Jowell said the reforms, which will come into effect from 1 April 2010, represented a fair package: “The existing compensation scheme has been in place since 1987 and isn’t appropriate for the modern Civil Service. Today’s changes will help ensure the Civil Service delivers the £500m efficiency savings that the prime minister announced earlier this year, while protecting the lowest-paid civil servants.”

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