Public sector pay-offs to be restricted to £95,000

The Treasury has launched a consultation on how the cap should be introduced. The document confirmed the NHS, UK Civil Service, police force, local government and schools are all within the scope of the legislation and will be included in the first round of the cap’s implementation. 

Chief secretary to the Treasury Liz Truss said: “It is clearly wrong when people leave public sector roles with massive pay-offs. It incenses the public when they see their hard-earned money used badly like this.”

Ms Truss added: “That’s why we are capping exit payments to stop unacceptably large pay-outs for senior managers.”

According to the Treasury, more than 1,600 highly-paid public sector workers received payments of more than £100,000 each in 2016-17 when they left their roles, with a total cost of £198m. Exit payments across the public sector came to £1.2bn in the same financial year. 

Meanwhile, HSJ reported that trusts and foundation trusts spent £46.7m on severance payments in 2017-18, up from £43.4m the year before.

The consultation, which is not aimed at scrapping exit payments entirely, will run until 3 July. The government said it welcomes input from bodies representing public sector employers, employees and their representative bodies and pay, pension and HR professionals, among others.

The Treasury said it intends to extend the cap to other public sector bodies in the future. The Financial Times reported this includes possibly extending the cap to organisations such as the Bank of England, the BBC and the Financial Conduct Authority.

However, the government has proposed the secret service, the security service, the government communications headquarters and the armed forces should be exempt from the cap. Guidance notes, published alongside the consultation, also suggested the cap could be relaxed in certain situations, including settlement agreements following whistleblowing or discrimination complaints.

The government initially announced its intention to block six-figure public sector pay-offs in 2015, and legislation to create the £95,000 cap was introduced in 2016.