Cap on public sector exit payments revoked


Regulations capping public sector exit payments at £95,000 have been revoked by the government, after a review found the cap may have had ‘unintended consequences’.

The Restriction of Public Sector Exit Payments Regulations 2020 came into force in November 2020 and set a £95,000 cap on exit payments in public sector organisations.

It has not yet specified what the “unintended consequences” of the payment cap have been.

A guidance document issued by the Treasury today encourages employers to pay any former employees who had an exit date between 4 November 2020 and 12 February 2021 and were affected by the cap the additional sums that would have been paid had the cap not been applied.

“Given that the cap has now been disapplied, it is open to employers to do so and HM Treasury’s expectation is that they will do so,” it says.

However, it said the issue of “unjustified” exit payments was still a matter of concern.

“For the avoidance of doubt, it is still vital that exit payments deliver value for the taxpayer and employers should always consider whether exit payments are fair and proportionate. HM Treasury will bring forward proposals at pace to tackle unjustified exit payments,” the guidance says.

Organisations affected by the cap included local government, fire services and schools; the NHS; police forces; the civil service and its executive agencies, non-ministerial departments and non-departmental public bodies; and academy schools.

Employment law consultant Darren Newman said the government needed to reflect on its “refusal to listen to those advising them that the [regulations] were a mess”.

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