Chief execs union criticises draft regulations for £95k exit payments cap

Earlier this week the Chief Secretary to the Treasury, Liz Truss, launched a consultation on how the cap will be introduced. The UK Civil Service, local government, police forces, schools and the NHS will be included in a first round of implementation.

The Treasury claimed that more than 1,600 workers received payments of more than £100,000 in 2016-17 when they left public sector roles, costing a total of £198m. English local government six-figure payments accounted for £98m. Exit payments across the public sector were £1.2bn in 2016-2017.

Truss said: “It is clearly wrong when people leave public sector roles with massive payoffs. It incenses the public when they see their hard-earned money used badly like this. That’s why we are capping exit payments to stop unacceptably large pay-outs for senior managers.”

However, the Association of Local Authority Chief Executives and Senior Managers (ALACE) has criticised the draft regulations.

Ian Miller, Honorary Secretary to ALACE, said: “Our principal concern remains the suggestion that the cost of pension strain should count towards the £95k cap. This would affect many council staff who face redundancy above the age of 55, not just high-earners. Under the local government pension scheme regulations, it is mandatory for councils to pay the cost of pension strain in these cases and there is no choice for the employee.

“The cost of pension strain is not cash in an individual’s pocket in the same way as a redundancy or compensation payment. Nor does it give anyone a pension that is higher than the entitlement they have earned. We therefore feel strongly that pension strain should be omitted altogether. At the very least, its ‘cash value’ to the individual should be assessed by applying an appropriate divisor as the pension will be received over many years, not in a single lump sum.”

Miller also said that ALACE was very concerned at the uncertainty created because the draft regulations do not have a specific implementation date. “This is no good for employers or employees, as no one can predict when the regulations will come into force: the date depends on when both Houses of Parliament approve them following the consultation and the changes that the Treasury makes to the regulations.”

The Association also expressed concern at the treatment of its members working in councils in Buckinghamshire and Northamptonshire, where reorganisations are due to happen in April 2020 as a result of Government legislation.

“Through no fault of their own, they could receive significantly less favourable treatment than council staff in Suffolk, Dorset and Somerset where reorganisations took effect at the beginning of the month,” it said.

Miller added: “Our members are at the most senior levels in local government, and they are strong advocates of local democratic decision-making. In that respect, we believe that the local government family will be concerned that the draft directions seek to require autonomous councils to obtain the Treasury’s consent if a full council meeting decides to waive the £95k cap in any particular case.

“This seems to us a significant interference in decision-making on employment matters where councils have enjoyed full autonomy, subject only to compliance with the law.”

The Treasury consultation runs until 3 July 2019.