Public sector exit payments
The Enterprise Act 2016 became law this month. It aims to promote enterprise and economic growth and covers a wide range of topics.
As well as including provisions on the appointment of a Small Business Commissioner for businesses with less than 50 employees and an obligation on insurers to pay claims within a reasonable time it enables the Treasury and Scottish and Welsh Ministers to introduce a cap on exit payments for public sector employees, currently set at £95,000.
Of all of the provisions, this cap attracted the most controversy as the bill made its way through the parliamentary stages. The cap includes all payments that are made to an individual upon termination of employment with the exception of certain compensatory and bonus payments.
Chunky exit payments made to senior public sector workers have hit the headlines over the past few years with around £6.5 billion having been paid out in 2014. More than £1 billion of this cost related to payments costing more than £100,000. A proportion of these payments will have been paid out under Settlement Agreements which often have the effect of silencing the exiting employee in relation to any potential claims or whistleblowing. There are concerns that this practice may have made the public sector less accountable.
With this in mind the Government proposed the cap, reasoning that six figure payments are far in excess of those available to workers in the private sector and a need for proportionality, fairness and consideration to the tax payer who funds these payments.
Scottish Public Authorities are generally a devolved matter for the Scottish Parliament however, employment law is expressly reserved by the Scotland Act 1998. The Scottish Government lodged a Legislative Consent Memorandum allowing the UK Government to consider the public authority aspect of the cap. The Treasury have proposed draft Regulations to introduce the cap in England in October 2016. However the Scottish Ministers have not yet proposed such Regulations in Scotland.
We will issue a further update as and when the Treasury decides to introduce the provisions and such regulations are proposed by Scottish Government.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
