Government introduces public sector exit payment caps and clawback provisions

The Government has brought into force provisions of the Small Business, Enterprise and Employment Act 2015 (“SBEEA 2015”) which allow it to:

1. Cap the amount of public sector exit payments in certain circumstances
2. Require certain high-earning public sector workers to repay exit payments if they are re-employed by the public sector within a certain period of time

The public sector exit payments cap

The Government has brought into force the regulations in SBEEA 2015 which allow public authorities to cap the value of exit payments made to public sector employees at £95,000 (a pre-tax value), although this cap can be relaxed in certain circumstances.

The repayment provisions

The Government has brought into force the regulations in SBEEA 2015 which require the repayment by an individual of some or all of any “qualifying exit payment” (for example, redundancy payments, payments in lieu of notice, any severance payment or other ex gratia payment etc.) made by a public sector employer in certain circumstances, including where the individual is re-employed in the public sector or is appointed to a public sector office within one year of their exit (although there are some further complicating factors).

Chris Hadrill, a specialist employment solicitor at Redmans, commented on the new regulations: “The bringing into force of the regulations on capping public sector exit payments and ‘clawing back’ payments in certain circumstances will have a broad and fairly immediate effect, an effect which will probably be most strongly felt in the composition of settlement agreements for exiting public sector employees.”