Last week, the Government 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. The date they will come into force has not yet been confirmed.
What is an exit payment?
Unless they are exempt or fall within circumstances in which the cap may be waived, exit payments under the Regulations include enhanced redundancy payments, severance or ex gratia payments, payments for shares or share options, voluntary exit payments, contractual payment in lieu of notice (other than payments that do not exceed one-quarter of the relevant person’s salary), payments made to extinguish any liability to pay money under a fixed term contract and any other payment in consequence of termination of employment or loss of office.
Who do the Regulations apply to?
The £95,000 cap on exit payments will apply to employees who have left employment of a relevant authority or office-holders who leave a public office. This includes local authorities and other public bodies but does not apply to Registered Providers of Social Housing.
Back in 2015 when the Government first consulted on capping exit payments, Registered Providers had recently been reclassified as “public non-financial corporations” so would have been caught by any new regulations. That reclassification was later changed and as Registered Providers are not deemed to be public bodies, they are not caught by the Regulations.
However, it is important to note that the Regulator of Social Housing will be covered by the Regulations when they come into force and therefore when considering whether Registered Providers have achieved value for money in making any exit payments, it may well take the public sector cap into consideration.
If you would like to discuss the Regulations or would like to find out more, please contact any member of the team.