Government issues statutory guidance on special severance payments by councils in England, saying they should only be made in exceptional cases

The Government has issued statutory guidance on the making and disclosure of Special Severance Payments by local authorities in England.

The guidance from the Department for Levelling Up, Housing and Communities says: “Most public sector workers enjoy statutory and contractual redundancy or severance terms that are significantly better than the minimum statutory redundancy entitlement and are often higher than the value of redundancy or severance payments made in the private sector.

“The government is of the view that paying additional, discretionary sums on top of these entitlements (“special severance payments”) do not usually provide good value for money or offer fairness to the taxpayers who fund them and so, should only be considered in exceptional cases.”

DLUHC adds: “Severance payments can be an important mechanism to allow employers to reform and react to new circumstances in the workplace, but employers have a responsibility to ensure that Special Severance Payments are only made when there is a clear, evidenced 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.

“In the exceptional circumstances where it is decided that a Special Severance Payment should be paid, it is the responsibility of individual employers to ensure their Special Severance Payments arrangements are fair, proportionate, lawful and provide value for money for the taxpayer.”

The guidance, which can be viewed here and forms part of the best value regime for local authorities in England, covers:

• What is a special severance payment?
• Considerations for local authorities on Special Severance Payments
• Exceptional circumstances in which it may be appropriate to consider making Special Severance Payment
• Accountability and disclosure.

It stresses that “it is established case-law that such payments, where in accordance with legislation, may only be made where there is a convincing case that they are in the interests of taxpayers. Local authorities may not be generous at the expense of taxpayers and must genuinely consider payments to be in the public interest. In taking decisions elected members must make all proper enquiries and consider all available material that can help in coming to a decision.”

In the section on exceptional circumstances, the guidance also says that authorities may consider a Special Severance Payment in order to settle disputes, where it can be properly demonstrated that other routes have been thoroughly explored and excluded. “After receiving appropriate professional advice, it may then possibly be concluded that a special severance payment is the most suitable option and prudent use of public money.”

The guidance adds: “Those approving a Special Severance Payment related to a settlement agreement should be provided with appropriate evidence that attempts were made to resolve disputes before they escalated to a legal claim. They should also bear in mind that even if the cost of defeating an apparently frivolous or vexatious claims will exceed the likely cost of that settlement to the employer, it may still be desirable to take the case to formal proceedings. This is because successfully defending such cases will discourage future frivolous or vexatious claims and demonstrate that the local authority does not reward such claims.”