Public Sector settlement cap to be introduced

The UK Government has confirmed its intention to introduce a cap of £95,000 on severance payments made to public sector employees upon the termination of their employment.

10 November 2015

We recently reported that the UK Government was consulting on a proposal to introduce a cap on public sector exit payments (access the article here).

The response to the consultation has now been published, which confirms that the Government intends to go ahead with implementing a cap of £95,000, which will apply to the vast majority of payments to public sector employees upon termination of employment, including voluntary or compulsory redundancy, payments in lieu of notice, early unreduced access to pension and any additional severance payments.  There will however be a waiver system for “special circumstances” and the cap won’t apply to payments made following litigation for breach of contract or unfair dismissal (although it does apply to payments made to settle threatened litigation).

The power to introduce the cap will be included in the Enterprise Bill, with the specific details to be set out in secondary legislation.  Most non-devolved public bodies in the UK will be covered by the cap, and whether the Scottish Government opts to introduce a cap for devolved Scottish public sector bodies remains to be seen.

The response to the consultation can be viewed here