Last August, we reported that the Government had published the draft Restriction of Public Sector Exit Payments Regulations 2020 (the Regulations) introducing the long-awaited £95,000 cap on public sector exit payments.
Following this update, on 4 November 2020, the Regulations came into force.
Our previous blog which can be found here, set out how the Regulations would work and the types of payments they would catch.
However, the Government had been due to face various legal challenges to the Regulations. These were coming from local government organisations who argued that the Regulations ignored existing contractual obligations, including agreed redundancy rights, and from trade unions who argued that the cuts to exit and redundancy terms could potentially affect hundreds of thousands of public servants. One such case was due to be heard next month.
Having undertaken a further review, the Government has now concluded that the Regulations may have had “unintended consequences”. They are therefore to be immediately disapplied and then revoked, and employers are encouraged to reimburse employees who were affected by the cap whilst it applied.
The Government has made clear that it will be looking at this area again so we can expect to see a new regime proposed. The Government guidance says that proposals will be brought forward “at pace”.
The revocation of the Regulations will have a knock on effect on the Ministry of Housing, Communities and Local Government (MHCLG) proposals to reform exit payment terms for local government workers, which in particular looked at the impact on LGPS benefits. These are also likely be abandoned for now, and reconsidered when the new exit payment proposals have been designed.
For more information, please get in touch with our Employment, Human Resources & Pensions team.