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Public Sector Exit Payment Cap Regulations update

The government has announced that the long-awaited but short-lived Public Sector Exit Payment Cap Regulations are to be revoked after just 3 months on the statute book.

The cap (which limited exit payments to £95,000) was first put forward in consultation in 2015 but it wasn’t until 4 November 2020 that the Regulations took effect, with only 3 weeks’ notice. Now the government has decided that as there were ‘unintended consequences’ the whole scheme is to come to an end abruptly. The Treasury has issued a Direction to disapply the Regulations. At the same time, the Guidance has been updated and in its new short form it boils down to:

  • Employees or office holders with an exit date between 4 November 2020 and 12 February 2021, and whose exit payment was affected by the cap, are advised to request the amount they would have received from their employer.
  • Employers are “encouraged” to pay the amount. It is now open to them to do, and there is an expectation that they will.

There were several different legal challenges brought in relation to the scheme by the Association of Local Authority Chief Executives and Lawyers in Local Government, Unite and GMB, Unison, the FDA, and the BMA. It is not clear if the Treasury’s review of the scheme is related to these challenges. So far there is no information on what, if anything, will replace the Regulations. The underlying guidance on seeking value for money remain, and it is likely that the government will seek to introduce a replacement scheme in the future.

The Healthcare Employment team at Ward Hadaway, Stuart Craig, Caroline Shafar, James English and Mark McKeever, can advise on severance and settlement packages for organisations within the public sector, particularly the NHS, and have experience in dealing with restructures, redundancies and dismissal.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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