The public inquiry into the Horizon scandal heard last week that it was standard practice for the Post Office to release permanent staff then rehire them as contractors at inflated pay rates
According to Jane Davies, chief people officer at the Post Office from December 2022 to June 2023, she was made aware of the practice – known within the organisation as “flipping” – early in her brief tenure. It was mostly applied to IT staff, who were released and then rehired on two or three times more pay.
Davies told the inquiry: “On my first day of employment with POL (1 December 2022), I was made aware of the practice, employed mainly by the IT department, of flipping permanent employees to contractors — exiting the permanent employee
(sometimes by way of settlement agreement) and re-engaging them as self-employed consultants/contractors.”
Post Office news
The Post Office Horizon scandal: an explainer
At the time the Post Office IT team was working on a project to replace the Horizon system, operated and designed by Fujitsu. The faults and misuse of Horizon by Fujitsu and Post Office employees had seen hundreds of subpostmasters falsely charged with fraud since the early 2000s.
In her statement, Davies said that flipping “did not represent value or proper management of money from POL”. The contractor roles were not subject to a formal review or approval on daily rates (as would have been the case with permanent staff), she said. Excessive daily rates were agree with the individuals who were friends or former colleagues of many of the department’s employees. She added: “POL was losing its permanent talent to contractor status, resulting in additional backfill costs to POL.”
Davies told members of the Post Office’s group executive that the practice was “highly unusual, non-compliant with a number of POL’s policies, and created risk with HMRC.” She added that she explained it was “not an appropriate talent strategy for POL and could lead to negative PR.”
After receiving messages that suggested the group executive would allow the practice to continue, Davies escalated her concerns to CEO Nick Read on three occasions, pointing out that “the IT department was out of control with spending and decision-making.”
It was documented that this was a deliberate course of action, to avoid the person concerned taking out a grievance or legal action against POL” – Jane Davies
She described to the inquiry one case in which a senior IT manager on about £120,000 per year, who had worked for the Post Office for seven years, was released under a settlement agreement. He was then brought back the following week on £1,500 per day as a contractor (£360,000 per annum). She said Read denied knowing anything about these costs and
did not intervene once told about them.
However, Davies said she saw an email trail and exchanges between Read and group executive member Mr Mladenov
backdated to November 2022, that revealed Read had known about this arrangement and had endorsed it. “It was documented that this was a deliberate course of action, to avoid the person concerned taking out a grievance or
legal action against POL,” she said.
Davies also detailed how her onboarding at the Post Office from 1 December 2022 had been “inadequate”. She said “there was an unwillingness to provide me with any written documentation; rather I received verbal updates over Microsoft Teams calls, which were mainly centred on providing me with the details of the group executive and board characters and capability. ”
It was revealed earlier this month that the Met Police was expanding its criminal investigation of current and past Post Office employees, civil servants and lawyers.
The public inquiry heard its closing statements on 17 December during which the organisation said its new leadership were “committed to making the changes necessary to restore confidence in the business, and to ensure that nothing like this [the Horizon scandal] will or could ever happen again.”
The Post Office scandal was first exposed by Computer Weekly in 2009, revealing the stories of seven subpostmasters and the problems they suffered because of the accounting software’s faults and misuse.
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