New approval process for public sector exit payments over £95,000

HM Treasury has published a consultation on proposals to introduce a new administrative controls process for public sector exit payments over £95,000. The consultation closes on 17 October 2022 and is accompanied by draft guidance.

The guidance is expressed to cover “‘Central Government’ and/or bodies that do not have a specific right to make exit payments”. The proposals will amend the existing process for special severance payments and is expressed to be part of the government’s wider ambition to reduce the use of large exit payments in the public sector.

Special severance payments are considered to be any payments made to employees in excess of their statutory or contractual entitlements, and any special severance payment regardless of its amount will need approval by HM Treasury unless a specific delegation is in place.

It should be noted however that exits involving a total payment to an employee of more than £95,000 including “relevant statutory and contractual entitlements” will also require approval, following the submission of a business case by the relevant public body, by the Secretary of State.

The draft guidance sets out what criteria should be considered before deciding on an exit payment and lists the types of payment that should be included when calculating an employee’s total exit payment.

The guidance also includes an expectation that recovery of special severance payments should be considered where such payments are agreed, and an employee may be re-employed in the public sector.

The consultation does not go as far as to reintroduce the much maligned Restriction of Public Sector Exit Payments Regulations 2020, or a revised version of them, but the executive summary does state that the government will keep its policy under review and “assess whether further legislation is needed in due course to deliver the stated policy goals of ensuring value for money for taxpayers”.

For further information in relation to public sector exit payments or public sector employment issues generally contact Helen Snow or our Public Sector England Team.