Government issues criteria to be considered for public sector severance payments  

HM Treasury has issued guidance detailing the criteria that public sector employers should consider before proposing a “Special Severance Payment”.

Special Severance Payments are paid to employees, officeholders, workers, contractors and others outside of normal statutory or contractual requirements when leaving employment in public service whether they resign, are dismissed or reach an agreed termination of contract.

The purpose of the Treasury’s guidance, which can be viewed here, is to:

• set out the criteria employers should consider before making a Special Severance Payment;
• explain the control process for relevant Special Severance Payments;
• set out the transparency requirements for Special Severance Payments.

The Treasury said: “Each year Special Severance Payments cost the government millions of pounds. Although they can be an important mechanism to allow employers to reform and react to new circumstances in the workplace, it is vital that they represent value for money and are fair to the taxpayer who fund them….

“Employers have a responsibility to ensure that Special Severance Payments are only made when there is a clear justification for doing so. They should also ensure that all relevant internal policies and procedures have been followed and all alternative actions have been fully explored and documented.

“When it is established that a Special Severance Payment must be paid, it is the responsibility of both individual employers and sponsoring departments to ensure their Special Severance Payments arrangements are fair, proportionate and lawful.”

In March this year the Government revoked the Restriction of Public Sector Exit Payments Regulations 2020, which introduced a £95,000 cap on severance payments, after a review found that the measure had created “unintended consequences”.