Significant reforms will be made to public sector exit payments during the course of 2016. This includes the exit payment clawback provisions (which are expected to come into force shortly and will require employees leaving the public sector to repay some or all of a qualifying exit payment if they return to work in the public sector within 12 months of their departure) and also the £95,000 cap on exit payments made to many public sector employees, expected to be introduced in Autumn 2016.
Consultation on a number of reforms relating to these issues remain ongoing until 3 May 2016 so there is still time to comment on them.
The proposals, which relate only to the public sector, include:-
Setting a maximum tariff for calculating exit payments of three weeks’ pay per year of service (so employers could apply tariff rates below these limits).
Capping the maximum number of months’ salary that can be used when calculating redundancy payments to 15 months.
Setting a maximum salary on which an exit payment can be based. It is suggested that this could be set at various levels, one example being the NHS scheme salary limit of £80,000.
Tapering the amount of lump sum compensation an individual is entitled to receive as they get closer to their pension retirement age.
Requiring employer-funded early access to pension to be limited or brought to an end.
What is clear, unsurprisingly, is that the proposals reflect the current trend of cutting costs within the public sector. The consultation document confirms the UK Government's intention that exit payments will continue to support employees but acknowledges a need for them to be proportionate, fair and provide better value to the tax payers who ultimately funds them. If you would like to contribute, the consultation document can be accessed here.