Consultation to introduce controls on public sector severance payments

You may recall that in November 2020, the government introduced legislation to place a statutory cap on public sector exit payments to a maximum of £95,000 for loss of office or employment.

The cap had been a long time in the making, with consultation in respect of reforming exit payments beginning as early as 2014.

The cap that was introduced in November 2020 only lasted until March 2021. Once introduced, it faced numerous judicial review challenges and the government decided to revoke it, commenting that its introduction ‘had unseen consequences’.

New consultation

The government is now consulting on introducing controls on severance payments over £95,000. The consultation opened on 8 August 2022 and will close on 17 October 2022.

Approval from the Secretary of State

The controls proposed include seeking approval from the Secretary of State for the agreement of any exit where the total exit payments would exceed £95,000.

What is needed for approval?

Such approval will require a business case with the following criteria being suggested:

• The exit is necessary to the employer.
• Alternatives have been considered.
• There is value for money in the exit.
• There are no undue risks.

Academies

Academies and MATs will already be aware of the requirements for approval of certain severance payments to the ESFA and it seems the additional process may well mirror certain aspects of the new controls being proposed.

The full consultation guidance can be found here.

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