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Exit payments above £95k to require ministerial sign-off

Published on: 11 Aug 2022

Severance payments above £95,000 will require ministerial approval under new proposals unveiled by the government.

A consultation published this week revealed the Treasury also wants to introduce an “expanded approvals process” that will see some exit payments having to be signed off by secretaries of state, and to roll out “strengthened and updated” requirements around special severance packages.

Last year, ministers scrapped plans to cap public sector exit payments at £95,000 following a legal challenge and widespread opposition from trade unions

The current consultation states: “In recent years, the government has been concerned about the number of very large exit payments made to individuals, which may be several times larger than average annual earnings in the public sector, and has committed in recent election manifestos to limiting large exit payments, and making provisions for the recovery of exit payments in certain circumstances.

“The government is considering a range of options to achieve these aims, including negotiating revisions to contractual exit payment terms, which are often the root cause of large exit payments.

“We believe that reform led by departments on a workforce-by-workforce basis will be the quickest, most effective, and proportionate way of achieving reform.”

It added: “It is in the interests of employers, employees and the taxpayer that there is robust process for the agreement of staff exits, and careful consideration of any alternatives to exit.”

The Treasury consultation proposes two separate but “closely related” control processes: the first for “high value” exits from central government, while the second is a “modified” version of the current system for approving special severance payments for public sector executives. Currently, packages over £100,000 require ministerial approval.

Approvals would be sought through a business case, and then sent to the relevant secretary of state, after going through accounting officer clearance and “any other existing clearance processes”.

All exits would need to demonstrate that an exit was “necessary to the body, that alternatives have been fully considered, that there is a value for money case for the exit, and that there are no undue risks attached,” according to the proposed plans.

‘Playing around’

Jon Restell, chief executive of the Managers in Partnership trade union, told HSJ the Treasury was “playing around with the approval processes rather than the contractual terms themselves”.

He said: “If the government wants to reduce the amount spent on exit payments, it should find ways to avoid compulsory redundancies in the first place and incentivise the retention of dedicated staff with unique skills and experience.

“With the lean management structure of the NHS, the public interest can’t be served by any other approach.”

A Treasury spokesman said: “It is right that the government ensures that public sector exit payments are fair and proportionate to employers, employees, and taxpayers.

“The new control process is an important part of this, and we welcome views as part of the consultation process.”