Recovering public sector exit payments

In July 2014 the government launched a consultation on proposals for recovering exit payments in the public sector. It was looking to address concerns with the amount of “high earners” receiving large exit payments and then returning to work in the same “sub sector” within 12 months.

The government has now published its response to the consultation and has confirmed the following:

• It intends to implement its proposals under the Small Business, Enterprise and Employment Bill, which will come into force by April 2016.

• “High earners” will be defined as those earning over £100,000.

• “Sub-sectors” will be based around central government departments (although there are several bodies which will be exempt). A full list of bodies in each sub-sector will be set out in legislation.

• The amount of the exit payment which must be repaid will be determined by a scale. If the “high earner” takes up employment in the same “sub-sector” within 28 days then the full amount must be repaid. After 12 months, none of the exit payment is recoverable. If the individual takes up employment with a lower pensionable pay, then the amount of the repayment will be will be reduced.

• The repayments will include (amongst others) redundancy payments, voluntary exit payments and ex-gratia payments (e.g. special severance payments). It will be possible to waive repayments in exceptional circumstances.

• The old employer will be obliged to tell the individual of their obligations as part of an exit payment agreement as well as ensuring that the exit payment is recovered where applicable.

• The new employer will be obliged to request information about previous redundancy payments and not to employ the individual until after the repayment arrangements have been finalised.
For more information please contact a member of the Employment Team.

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