The Government is consulting on a proposed a cap of £95,000 on exit payments for public sector employees.
It is proposed that payments caught by the cap will include redundancy payments, payments in lieu of notice and pension enhancements (including the cost to the employer of unreduced early retirement pensions). The £95,000 figure is an aggregate (so an individual couldn't have £95,000 redundancy plus an unreduced early pension). The £95,000 is to include payment of settlement agreements, but not payments following litigation. Payments over £95,000 will only be possible with express ministerial permission.
Further consideration is being given by the Government to ex-public sector employees subject to TUPE transfer – although it is hard to see how the cap could be applied retrospectively to them. This could result in transferred employees being better off than those who have remained in the public sector.
It is proposed that the cap will apply to most public sector employees, excluding the armed forces. Public financial corporations (e.g. RBS and NEST) will also be excluded, but they will be encouraged to consider similar rules on a voluntary basis.
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