Public sector exit payments: Government proposes recovering payments of over £100,000 where individual returns to their sub-sector within 12 months
Published 20 November 2014
We have already sent out a number of alerts this month. Of most significance were our alerts about how holiday pay should be calculated where workers ordinarily receive overtime. The High Court has also heard Unison's second judicial review application recently and looked at whether employment tribunal fees are lawful.
The proposals are that:
- An individual with a salary of £100,000 or more who is made redundant and receives an exit payment will have to repay some, or all of that exit payment to the previous employer when that person is engaged by another public sector body within the same sub-sector.
- The amount of exit payment that must be repaid is determined on a scale with the full amount being recoverable if the person is engaged within 28 days, up a maximum of 12 months after their dismissal, after which none of the exit payment is repayable. The proportion of exit payment that may be retained will relate to that individual’s loss of earnings when they were between employments.
- The amount of the repayment will be reduced if the person returns to a role with lower pensionable pay.
- The Secretary of State of the relevant department of each sub-sector may decide whether to grant a waiver to an individual to remove the obligation to repay.
- The legislation will reflect the issue of individuals who return to work for a public sector organisation, off payroll, for example either as an individual consultant or as an employee of a consultancy firm.
- A casual work limit of 15 days in a 90-day period will be permitted, which could be waived if justified by value for money reasons.
- Regulations will provide a complete list of sub-sectors. The government will consult on the sub-sectors as part of a consultation on the policy’s regulations.
- The full council may grant a waiver for repayment in cases involving local authorities, and for the local government bodies for which they have oversight or control.
The proposals also set out a number of obligations on employers including requiring the old employer to:
- Inform the individual of their obligations as part of an exit payment agreement.
- Retain sufficient records to allow for calculation of the amount of money due to be repaid, in line with Treasury guidance.
- Agree repayment arrangements with an ex-employee once informed that the individual intends to return to work in the same sub-sector of the public sector.
- Inform the new employer where repayment arrangements have been made.
- Ensure that the exit payment is recovered.
- Where applicable record in Annual Report and Accounts details of the waiver.
The new employer will be obliged to:
- Conduct pre-appointment checks, re-informing the individual of their obligation.
- Delay engagement until after confirmation from the old employer that arrangements for repayment have been made.
- Inform the old employer of the planned date the individual is to be engaged from.
- Provide details of the individual’s new salary for calculation purposes.
What this means for employers
The main impact of these proposals will obviously be on the individual employees who may need to pay back some of their settlement monies. However, the obligations on both the old and new employers will mean more administration for them when exiting highly paid individuals.