Legislation allowing the government to impose a cap on public sector exit pay was brought into force on 1 February 2017. However, until now the government has not sought to utilise this power. The government is currently consulting on Draft Restriction of Public Sector Exit Payments Regulations 2019 and accompanying guidance which will activate the cap. You can view and respond to the consultation here. The consultation is open until 3 July 2019.
The government has not yet indicated when its proposes the cap would come into force, but given that the consultation does not end until July, it is unlikely to be before the autumn Parliamentary term.
The cap may not be as constraining as first thought. A variety of exit payments are proposed to be excluded from the £95k cap, the main exceptions being:
Once these deductions are made to the overall exit sum, it is likely only to be unusual and/or senior terminations which risk infringing the cap.
Employers can apply to the relevant Minister for the cap to be relaxed. It is proposed that approval to exceed the cap should be mandatory when:
It is also proposed that there be a discretion to relax the cap, used in exceptional circumstances only, when:
If any significant exits are in contemplation, employers should calculate whether the exit payment would be caught by the proposed cap and if necessary, plan for the exit to take place before the cap comes into force.
Interestingly, the government has not also resurrected plans to claw-back public sector exit payments if an employee were to re-enter the public sector workforce within 12 months of termination. The draft regulations have also removed any reference to a payment over £95k (in breach of the regulations) being unenforceable in the courts. This means that an employee could sue for a £95k+ agreed exit sum as a contractual debt.