Cap on public sector exit packages comes into force


The Government has just announced that after 1st February 2017 those in public sector positions will have a cap imposed on their exit packages of £95,000. This includes exit packages under a settlement agreement. On 24th January 2017 the Government passed a statutory instrument which will bring the cap on public sector exit payments into force on 1st February 2017. The cap is set at £95,000. This provision was originally proposed under s41 of the Enterprise Act 2016 but required a statutory instrument to be passed to bring it into effect.

The £95,000 sounds like a lot of money but this does include a number of payments which must not exceed this amount. It includes any payment on account of dismissal by reason of redundancy or for a voluntary exit, any severance payment, outstanding benefits and notice. In my experience it is not uncommon for senior officers within the public sector to have a long notice period of 6-12 months and for them to have accrued long service so larger statutory redundancy payments. There is also an interesting provision for this sum not be exceeded if two payments are made within 28 days so to avoid any clever drafting in a settlement agreement whereby the payment is made in more than one instalment. Interestingly the cap is not a % of one’s salary but a set amount so the cap will hit the more senior officers on higher salaries the hardest.