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Legislation Implementing a £95,000 Cap on Public Sector Exit Pay To Be Revoked

on Friday, 19 February 2021.

On 12 February 2021 the Government announced that the Restriction on Public Sector Exit Pay Regulations 2020 (Regulations), which implemented a £95,000 cap on public sector exit pay, should be revoked.

The Regulations came into effect on 4 November 2020 following a very lengthy consultation process. However, as previously reported, the Regulations posed various difficulties and were the subject of much criticism and legal challenge. Judicial review challenges concerning the Regulations were due to be considered next month. It is not clear whether these will go ahead regardless of the revocation of the Regulations.

The Government has determined that the Regulations had "unintended consequences" and therefore should be revoked. Whilst the Government has not stipulated what those "unintended consequences" were, we expect this related to the conflict between the Regulations and other legislation - notably the Local Government Pension Scheme rules.

Pending the formal revocation of the Regulations, the cap shall be disapplied.

What Should Employers Do?

The Government has issued brief guidance for individuals and employers affected by the cap.

The Guidance states that employers who have capped exit payments as a result of the Regulations being in force since 4 November 2020, should now make any additional payments to affected former employees.

Employers who have made any amendments to policies or announcements to staff due to the Regulations will need to take steps to reflect this update.

We would note that the Guidance confirms that the Government remains committed to the objective of the Regulations to ensure value for taxpayers and fair and proportionate exit payments and will "bring forward proposals at pace to tackle unjustified exit payments". We will be keeping this under review and updating you in due course.

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In the meantime, please contact Allison Cook in our Public Sector team on 07787 126336 if you need any further support. Alternatively, please complete the form below.

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