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Restriction of Public Sector Exit Payment Regulations

They've been a long time coming but the Restriction of Public Sector Exit Payment Regulations 2020 are finally due to arrive. First suggested in late 2015, the Regulations have been published and will take effect from 4 November 2020. The central plank of the Regulations is the cap of £95,000 on exit payments made by public sector bodies to employees or office holders.

The Regulations go into greater detail on the type of public sector bodies this applies to, and the circumstances of exits or severance packages that it will cover. It will include local authorities, county and district councils, NHS trusts and foundation trusts, CCGs, and Special Health Authorities, as well as other public bodies.

The cap will apply to any exits within 28 consecutive days of each other, so that if the payments are somehow staggered the total amount paid to the employee as termination payments cannot exceed £95,000.

The cap applies to all payments made by reason of redundancy (not including statutory redundancy payments), certain payments relating to pensions and early retirement, payments under an ACAS settlement or settlement agreement, severance or ex gratia payments, payments in lieu of notice or for compensation for loss of office. It does not apply to payments made in relation to death in service, or for accident, injury or illness and payments for injury to feelings made in respect of discrimination. Payments made under a court or tribunal award are also excluded. There will also be certain situation where the restrictions can be relaxed, usually with Treasury approval. The Treasury is due to publish a Direction and guidance on the Regulations shortly.

The wide scope of the payments that will be subject to the cap means that many employees will be affected, particularly longstanding employees with substantial contractual redundancy payments or notice periods, as well as individuals who have an internal dispute or potential claim. Also, the Regulations do not create any specific way to recover any money paid in excess of the cap – the obligation falls on the authority not to make the payment, so it will be for the Treasury to take action if they are in breach. The individual has to declare the payment but there is no explicit requirement that they repay it. It is a complicated system and public sector bodies will need to ensure they are clear on what they are and are not entitled to pay.

The Healthcare Employment team at Ward Hadaway, led by Stuart Craig, can advise on complex dismissals, severance packages, settlement agreements for directors and senior staff within the public sector, particularly the NHS, and have experience in dealing with issues of discrimination and whistleblowing this can involve.

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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Stuart Craig

Partner | Employment

+44 (0) 330 137 3163

+44 (0)785 092 8013

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James English

Associate | Employment

+44 (0) 330 137 3162

+44 (0) 770 130 9588

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