Secretary of State granted power to cap exit payments for public sector workers
Following a Government consultation on proposals to end six-figure exit payments for public sector workers, on 1 February 2017 the Secretary of State was granted the power to issue regulations capping public sector exit payments at £95,000.
The draft Public Sector Exit Payment Regulations 2016 provide that an ‘exit payment threshold’ would be set at £95,000 and would apply to the following payments:
- Redundancy and voluntary exit payments
- Early access to unreduced pensions
- Payments by way of shares on loss of employment
- Payments to discharge liability under a fixed-term contract
- Any other payment made in consequence of loss of employment
The Government has confirmed the catch all provision of ‘any other payment’ includes payments in lieu of notice (PILON).
We have not received any indication as to when the regulations will be issued and to what extent they will reflect the draft regulations. Furthermore, if there is to be a catch all provision which includes payments in lieu of notice, it is not clear how this will affect existing contracts with PILON clauses where the contractual notice period would exceed £95,000.
We will provide an update when the regulations have been published. In the interim, public sector workers should be mindful of the impending change and how it may affect negotiations surrounding settlement agreements and voluntary redundancy.
This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.