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25 February 2016

EMC Update on Exit Pay

On 23th February at the House of Commons committee stage for the Enterprise Bill, the Government confirmed that the £95k exit payment cap for public sector workers will not come into effect until 1st October 2016 at the earliest.   EMC recently circulated an update on developments with the proposed exit pay cap as it goes through the parliamentary process.  A further update on this and other key legal developments will be provided at EMC’s employment law event on 8th March 2016.

Along with are partner regional employers’ organisations, we are keeping a watch on developments with the proposed exit payment cap that is being considered as part of the Enterprise Bill, which is currently being considered by a Commons Committee.  The following is therefore an update that will hopefully be of interest.

 1. LGA’s submission 

In their submission to the Committee, the LGA are proposing amendments so that:- 

  • a person doesn’t need to take their LGPS pension at the point of their redundancy if the exit cap would mean that this would be reduced, and
  • any agreements reached on exits between employers and individuals before the cap comes into force aren’t affected by the cap, even if the person doesn’t exit until after the implementation date of the cap.

 The LGA also asks the Government to confirm that local authorities will have the power to waive the cap in certain circumstances.  A copy of the submission is attached.

2. Parliamentary Progress of the Enterprise Bill

Latest update on progress of the Enterprise Bill through the Commons can be found at enterprise bill   In summary, two Committee Members (Labour) have laid notice of a long series of amendments (for consideration on 25th  February), which would, as follows:-

  1. remove the payment cap on public sector exit payments set at £95,000
  2. increase the cap to a level similar to the NHS, £145,000
  3. exclude settlements made at an early conciliation stage
  4. create an exemption from the cap for whistle-blowers
  5. subject the amount of the cap to annual revaluation
  6. exempt exit payments made under existing public service agreements
  7. exempt from the cap those earning below the national average wage
  8. exempt from the cap those who have provided ‘long service’
  9. ensure that Early Conciliation settlement via ACAS, cases when organisations use payments as an alternative to legal claims, which employers are legally obliged to attempt would be excluded
  10. ensure that restriction on public sector exit payments is set will be linked to inflation and earnings growth
  11. exclude discrimination cases from the cap on public sector exit payments
  12. exclude from the public sector exit cap certain exit agreements that have already been entered into between the employer and employee prior to the implementation of the cap
  13. ensure that redundancy schemes underway before regulations implementing the cap take effect are not interfered with retrospectively
  14. exclude from the cap compensatory payments made by an employer to a pension scheme which do not go to the person leaving the service.
  15. ensure that when considering staff for exits value for money is considered
  16. remove payment in lieu of notice from the public sector redundancy exit cap
  17. exempt from the public sector exit payment those earning less than £27,000
  18. provide that regulations may make exemptions from public sector exit payment cap for any period of institutional reorganisation being implemented within two years of this Act
  19. provide that regulations may make exemptions where the full council of the local authority decide to grant a waiver of the cap
  20. extend the waiver in respect of the cap to all public sector authorities
  21. give an individual the choice to take a pension immediately or delay taking it under the Local Government Pensions Scheme on being made redundant or because of business efficiency if under the cap such a payment would be actuarially reduced

There still remains a small window of opportunity for interested parties to submit evidence and views to the Committee ahead of the Committee final meeting.  Therefore, if you have some examples of how the cap would have an impact, then please share them with me to pass on to the LGA.


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