New Government guidance on public sector exit payments01/06/21
The Government has published new guidance for public sector employers on the making of special severance payments, namely those payments that are made on termination of employment which do not correspond to an established contractual, statutory or other existing right.
The guidance, which can be found here, supplements the special severance guidance set out in Annex 4.13 of Managing Public Money. It emphasises that special severance payments should only be made in exceptional circumstances, and where there is a clear justification for doing so. Such payments will always require approval from HM Treasury.
The guidance sets out the criteria that public sector organisations should consider before proposing a special severance payment. It also details the approval process required for a special severance payment to be authorised, including the business case requirements, and introduces new transparency requirements for the annual reporting of such payments.
Failure to comply with the requirements can lead to a fine of up to five times the amount of the special severance payment, or £10,000, whichever is the higher. Financial sanctions are at the discretion of the Chief Secretary of the Treasury, who may take into account any mitigating circumstances, the value of the special severance payment and whether there have been any previous breaches.
How Capsticks can help
Capsticks has significant experience in advising on the issues arising out of termination of employment in the public sector, including advising on the approval process and drafting and negotiating termination arrangements for departing staff. For further information on how this issue might affect your organisation, please contact Victoria Watson, Alistair Kernohan or Chloe Edwards.