HM Treasury updates public sector guidance on special severance payments

Key changes and reminders

The updated guidance highlights several points that public sector employers should keep in mind when considering a special severance payment. Where a settlement agreement is proposed, the inclusion of confidentiality provisions means the payment is treated as novel, contentious or repercussive. In these circumstances, employers must obtain HM Treasury approval before making any offer, regardless of the amount involved.

Where a proposed special severance payment is both novel, contentious or repercussive and totals £300,000 or more, approval from the Chief Secretary to the Treasury is required. By contrast, payments of £300,000 or above that do not fall into these categories do not require Treasury approval, although they must still be authorised through the relevant departmental processes.

The Treasury reminds departments that special severance payments should not be used to avoid management action or reputational difficulty, and that settlement agreements involving payments outside contractual or statutory entitlement must always be justified, documented and approved in advance.

The updated guidance applies to central government departments, arm’s-length bodies and other sponsored public bodies. Local authorities in England remain subject to separate guidance which has not been updated. 

For more information or advice, please contact Rory Jutton in our Employment team.