Back to Work - Recovery of Public Sector Exit Payments

We previously reported on the government's proposal to limit exit payments to £95,000 in the public sector. The government have now published their consultation regarding a proposal for high earning individuals who have left the public sector and wish to return to have their exit payment recovered.  The amount recovered back will be net of tax.

The Policy

There was previously a consultation in 2014, and the government have modified the policy as follows:

• The minimum earning threshold for public sector employees and office holders subject to the recovery provision has been reduced from £100,000 to £80,000 per annum.
• Rather than establishing groupings of public bodies, for example a Health sub sector, the provisions will apply if the individual returns to any part of the public sector.
• There will be tapered recovery from the date of exit up to 12 months, and no recovery after 12 months.
• Employer funded pension top up payments made under the Local Government Pension Scheme will be included within the sums to recover, in order to align with the recovery of other similar payments.

How it Works

The provision will work by requiring the returning individual to notify their new and previous employer, within the preceding 12 months after receiving an exit payment, that they wish to return to the public sector. The old employer will then make arrangements to recover the payment. If the previous employer has dissolved, the new employer will recover the payment and pay the amount into a consolidated fund. Old employers will be able to take individuals to court to reclaim the money.

The public sector is set to comply with this new policy from April 2016. The consultation closed on 25 January 2016.

The Scope

Payment for loss of employment will be subject to recovery, which includes discretionary payments to buy out actuarial reductions to pensions and severance payments. Payments excluded from recovery include contractual entitlement unconnected to loss of employment, payments which have potential, if not actual, monetary value and payment in lieu of notice.

The government's paper states that the cap will apply to 'bodies classified as within the public sector by the Office for National Statistics for the purposes of National Accounts'. This will include the following bodies:

• academies and academy trusts, foundation schools, community schools, voluntary aided schools, voluntary controlled schools and free schools, and university technical colleges
• county councils and district councils
• local authorities departments

There are various bodies exempt from the policy, including a number of public financial corporations, the Armed Forces and Housing Associations.

View the consultation paper:
Public Sector exit payment recovery regulations: consultation - and draft regulation.

For more information, please contact Allison Cook on 0117 314 5466.