In the last financial year, 2014/15, Hammersmith and Fulham Council spent £756,386.70 on redundancy pay.
But new rules from central Government will align currently generous public sector redundancy payments with those available in the wider economy. Research indicates that redundancy pay is higher in the public sector. Between 2010-11 and 2013-14, redundancy pay averaged £12,700 in the private sector compared to £15,800 in the public sector.
The proposed changes will make public sector redundancy payments fairer, modern, and more consistent. They will apply to all major workforces including the Civil Service, Teachers, NHS workers, local government workers, police offers and firefighters.
The changes include:
- setting a maximum tariff to calculate exit payments at three weeks’ pay per year of service
- capping the maximum number of months’ salary that can be used to calculate redundancy payments to 15 months
- introducing a tapering element that will reduce the amount of compensation lump sum an individual is entitled to the closer they get to their retirement age
- setting a salary cap for calculating exit payments which will be based on £80,000 reducing the cost of employer funded pension top ups for early retirement as part of redundancy packages
Chief Secretary to the Treasury, Greg Hands said:
“At the Spending Review the government set out how it will protect Britain’s economic security, fix the public finances and return the country to surplus so we can pay down our national debt.
“A key part of this is modernising the public sector workforce. Reforming public sector redundancy payments could save taxpayers hundreds of millions of pounds by 2020 and will ensure that public sector workers get a fair deal by ensuring greater consistency in redundancy pay-out terms between workforces.
“New guidance for public sector employers on pay and terms will set out what is acceptable and what isn’t. Taxpayers’ money shouldn’t be used to pay for private health insurance and gagging orders to cover up bad practice.
“These are just the latest steps in our modernisation plan – which saved taxpayers £12 billion over the last parliament.”