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Redundancy iStock 000006411338XSmall 146x219The Government has modified its approach to the recovery of public sector exit payments. Allison Cook reports.

HM Treasury have published a consultation regarding the Government's proposal for exit payments to be recovered if high-earning individuals leave the public sector and return within 12 months.

We previously reported on the Government's proposal to limit exit payments to £95,000 in the public sector. The Government have now published their consultation regarding a proposal for high earning individuals who have left the public sector and wish to return to have their exit payment recovered. The amount recovered back will be net of tax.

The policy

There was previously a consultation in 2014, and the Government have modified the policy as follows:

  • The minimum earning threshold for public sector employees and office holders subject to the recovery provision has been reduced from £100,000 to £80,000 per annum.
  • Rather than establishing groupings of public bodies, for example a health sub sector, the provisions will apply if the individual returns to any part of the public sector.
  • There will be tapered recovery from the date of exit up to 12 months, and no recovery after 12 months.
  • Employer funded pension top up payments made under the Local Government Pension Scheme will be included within the sums to recover, in order to align with the recovery of other similar payments.

How it works

The provision will work by requiring the returning individual to notify their new and previous employer, within the preceding 12 months after receiving an exit payment, that they wish to return to the public sector. The old employer will then make arrangements to recover the payment. If the previous employer has dissolved, the new employer will recover the payment and pay the amount into a consolidated fund. Old employers will be able to take individuals to court to reclaim the money.

The public sector is set to comply with this new policy from April 2016. The consultation will close on 25 January 2016.

The scope

Payment for loss of employment will be subject to recovery, which includes discretionary payments to buy out actuarial reductions to pensions and severance payments. Payments excluded from recovery include contractual entitlement unconnected to loss of employment, payments which have potential, if not actual, monetary value and payment in lieu of notice.

The Government's paper states that the cap will apply to 'bodies classified as within the public sector by the Office for National Statistics for the purposes of National Accounts'. This will include the following bodies:

  • academies and academy trusts, foundation schools, community schools, voluntary aided schools, voluntary controlled schools and free schools, and university technical colleges;
  • county councils and district councils;
  • local authorities departments.

There are various bodies exempt from the policy, including a number of public financial corporations, the Armed Forces and housing associations.

Allison Cook is a partner at Veale Wasbrough Vizards. She can be contacted on 0117 314 5466 or This email address is being protected from spambots. You need JavaScript enabled to view it..