This article is now out of date following recent news – please see Revocation of the Public Sector Exit Payment Cap.
On the 1st February 2017, section 41 of the Enterprise Act 2016 came into force capping public sector exit payments at a maximum of £95,000.
Public Sector Exit Payment Regulations have been drafted setting out the details of the proposed cap - but the Regulations have not yet been brought into force.
The draft Regulations state that the £95,000 cap will apply before tax, and will cover the total aggregate value of the following payments:
The government has also said that it is in the process of implementing a new framework which all public sector employers will need to adhere to.
The framework includes:
The government expects Departments to produce proposals to implement the framework and to have made the necessary changes by the end of June 2017.
Agenda for Change NHS employees are currently entitled to one month’s pay per year of service (up to 24 years) as part of their redundancy terms. Under the government proposal, that will be slashed to three weeks’ pay, and the final figure will be limited to 15 months’ salary. This would mean for example, that someone on Agenda for Change pay point 21 (Band 5 or 6) with more than 24 years’ service could lose around 45% of their redundancy payment entitlement.