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Update on cap on public sector exit payments


In May 2015 the Government announced its intention to end six figure exit payments for public sector workers and impose a cap of £95,000.

The Public Sector Exit Payment Regulations 2016, published in November 2015, confirm that the £95,000 threshold will apply to the total amount of pay received by an individual for loss of employment, including redundancy payments, voluntary exit payments, and “any other payment made as a consequence of, in relation to, or conditional upon, loss of employment whether under a contract of employment or otherwise”.

The Regulations specifically exclude some payments from the scope of the legislation, for example payments for unused annual leave and bonuses due under a contract of employment while part 3 of the Regulations provides for a relaxation of the cap in exceptional cases. The discretion to disapply the cap must be exercised in accordance with any (as yet unpublished) guidance issued by the Treasury.

Certain bodies will also be exempt from the cap, such as the Armed Forces, National Museums, public broadcasters, the Bank of England and other public financial bodies. But the Government has re-emphasised that it has a 'strong expectation' that exempt bodies will 'come forward with their own, commensurate cap on exit payments'

The Enterprise Bill (giving rise to the new Regulations) has passed all stages in the House of Lords and had its first reading in the House of Commons on 16 December 2015. In its final reading in the Lords, Lord Wills (Lab) argued for the need to explicitly disapply the cap to protect whistleblowers by reversing the burden of proof to make clear that all public interest disclosures will merit breaching the cap unless it can be shown that disclosures were not in the public interest.

However, no actual amendment to that effect was tabled so it appears that whistleblowers will not be able to breach the cap unless they can demonstrate that the Part 3 relaxation should be applied because they have made disclosures genuinely in the public interest, and the Treasury will be the judge and jury of that!

Meanwhile, the Repayment of Public Sector Exit Payments Regulations 2015 (in force from 1 April 2016) introduce a claw back on redundancy payments made to high-earning public-sector workers who return to work in the sector within 12 months.


public sector pensions, enterprise bill

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