The Government has published its response to the consultation on reforms to public sector exit payments, which aim to ensure greater consistency between public sector redundancy payments and provide better value for taxpayers.

These reforms will apply to the majority of the five million workers in the public sector, including civil servants, teachers, NHS staff, local government workers, armed forces, police officers and firefighters. They will apply to both voluntary and compulsory redundancies.

The main proposals include:

  • a maximum tariff for calculating exit payments of three weeks’ pay per year of service;

  • a ceiling of 15 months on the maximum number of months’ salary that can be paid as a redundancy payment;

  • a maximum salary of £80,000 on which an exit payment can be based;

  • a taper on the amount of lump sum compensation an individual is entitled to receive as they get closer to their normal pension retirement age; and

  • action to limit or end employer funded early access to pension as an exit term.

Each Government department will be asked to produce proposals for their workforce, and the Treasury has stated that it expects the necessary changes to be made within nine months. However, given that exit payment terms in the public sector have historically been set at workforce level in collective agreements, and the fact that the public sector is heavily unionised, it remains to be seen whether the changes can be implemented within this timescale.

The Government is already committed to introducing a cap on all public sector exit payments of £95,000 and to clawback of redundancy compensation when a highly paid employee returns to the public sector shortly after receiving an exit payment.