Government plans to attack redundancy agreements

Government is trying to cut back the amount it costs to get rid of workers in the public sector


Redundancy, or the threat of it, has been a reality for public service workers ever since the crash of 2008 and the austerity agenda that has followed.

But redundancies can be expensive – especially in large numbers – however much they save the employer in the long term.

So as part of that agenda, redundancy rights and payments have been under attack for the past two years – with more on the way.

In early February, the government announced a consultation on new plans to “make public-sector exit compensation terms fairer, more modern and more consistent”.

In other words, reducing the amount paid to someone who is losing their job through no fault of their own.

The proposals in the consultation, which ends on 3 May, include:

  • no more than 15 months’ pay for anyone made redundant, no matter how long they’ve worked;
  • redefining a month as three weeks for the purposes of calculating a redundancy payment;
  • setting a maximum wage for redundancy payment, no matter what people actually earn;
  • reducing lump sum payments the closer people are to retirement;
  • cutting employer’s pension top-up payments for workers offered early retirement rather than redundancy.

The Treasury consultation document says that it will look to individual departments to “negotiate and agree reforms, and then implement them, including where applicable through changes to secondary regulations”.

All this is while other reductions are due to come into effect this year.

Almost two years ago, the government announced plans to take back the redundancy payments of anyone who got another job in the same area within 12 months – if they earned more than £100,000 a year.

UNISON commented on those plans, and much of what we said was taken into account when the draft legislation was drawn up.

But with changes due to start in April this year, the government has now produced new draft legislation that moves the goalposts by quite a bit.

Now, anyone earning more than £80,000 – rather than £100,000 – will have to pay back an earlier redundancy payment if they get a new job in any part of the public sector.

Last summer saw proposals for an absolute cap of £95,000 on ‘exit payments’ – both redundancy and early retirement.

Plans for this are included in the Enterprise Bill that is currently going through Parliament and is expected to come into force this summer.

Ministers said that this is to prevent high-earners walking away with unfairly large sums. But it’s not that simple.

“Six-figure sums” is one of those phrases that can raise hackles, but the plans would also hit people made redundant after many years service on low and middle earnings.

In the NHS, for example, there is already a negotiated cap – agreed just this month – of 24 months’ payment.

So everyone earning more than £47,500 a year – including unsocial hours payments, London weighting, etc – would be hit be the new cap.

That would affect health workers with long service who have worked their way up to positions such as nurse ward manager or paramedic team leader.

And the effect would be worse in local government.

The cap includes payments that those who are made redundant don’t actually receive – so if someone is over 55 and their redundancy triggers a right to early retirement, the cap will include payments the employer makes to the pension scheme to allow early pensions.

The Cabinet Office has confirmed that this could mean staff earning as little as £25,000 being hit by the new rule.

And now we have the new consultation from the Treasury on even more cuts to redundancy payments.

All these changes are happening at break-neck speed with short consultation periods.

The government seems determined to come up with new, draconian measures every few months: it has indicated that it plans to look at sickness absence levels in the public sector and it isn’t likely their solution will involve investment in staff and their health.