You may have read our update in May last year in relation to public sector exit payments, in which we promised to issue a further update when Regulations were proposed by the Scottish Government.
Whilst the UK Government has set out its proposals, exit payment caps, recovery and reform of payment terms are devolved matters. Although we still await these Regulations, we are a step closer, because the Scottish Government has now published a consultation on public sector severance arrangements, which will remain open until the 23rd of June 2017.
Statistics published by the Scottish Government in the consultation show that the majority of public sector exit payments fall within the £10,000 to £50,000 bracket, but that in 2015-2016 17 out of 560 exits cost employers more than £100,000.
In the consultation the Scottish Government is explicit that it does not currently have a "preferred way forward" but instead seeks to explore four broad options:
- Status Quo – severance arrangements decided with best value and fair work principles in mind, but with no cap or clawback provision;
- Non-legislative change – reforming current devolved compensation arrangements to improve value for money and adherence to fair work principles, but without introducing new Regulations;
- Replicating UK arrangements – introducing a cap of £95,000 (including employer costs of providing early unreduced access to pensions or any form of pension 'top-up') and recovery of exit payments for those who earned more than £80,000 and returned to work in the public sector within 12 months; and
- A hybrid approach – which could for example strengthen current arrangements and/or introduce some form of different cap and/or recovery arrangements.
The Government is also consulting on the types of payments that would be included in a cap, were a cap to be introduced. For example, whether a pension 'top-up' should be included in any future cap as this could "potentially make exit payments less attractive to employees and tie employers' hands further in their ability to re-shape workforces".
It is also worth noting that the terms of the Civil Service Compensation Scheme are reserved to the UK Government, and so this consultation will not impact on those covered by that scheme.
The consultation is open ended and the Government are clear that any decision will seek to balance the maintenance of constructive relationships with unions and employers, value for money for the tax payer and the fair treatment of the public sector workforce.
For the time being any proposed public sector severance arrangement should be carefully considered in light of this consultation and the potential severance and pensions costs.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
