Employment Issues

Capping public sector redundancy payments is only half the story

Sold as an end to ‘golden goodbyes’, a cap on redundancy payments for public sector workers is set to be introduced by legislation following promises made in the Queen’s speech. But the true impact will be felt much further.

The Guardian reported that:

A legally binding £95,000 cap is to be imposed on redundancy payments in the public sector in a move designed to save hundreds of millions of pounds. Greg Hands, the chief secretary to the Treasury, will say the new cap will be enforced through legislation and will bring an end to “golden goodbyes” in the NHS, the civil service and local government.

Although the cap may change downwards after consultation, the policy looks set to apply not only to redundancy payments, but also to settlement agreements and other ‘special’ severance deals. If, or when, introduced, the costs to the public purse may well go down, but the discretion over settling workplace disagreements will be curtailed, possibly forcing aggrieved workers into a very public court or tribunal procedure.

Settlement agreements are often used to confidentially resolve potential or existing disputes, some of which can be costly. Unlike typical unfair dismissal or redundancy claims, where there are allegations of discrimination, health and safety issues or whistle-blowing claims, the usual cap of a year’s salary (or £78,335) may be lifted.

The freedom to negotiate is important for businesses and it is unlikely that the private sector will adopt a similar approach voluntarily. That’s not to say that many organisations aren’t accountable to shareholders and stakeholders. Suggestions that public service broadcasters should also follow the ‘spirit’ of any new legislation may be timely, given the anticipated reduction in BBC staffing levels.

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