In 2016, the Enterprise Act 2016 became law. Part 9 of the Act established restrictions on payments made to public sector workers on their exit from employment.
The restrictions apply to teachers and school leaders in local authorities, maintained schools and academy trusts. They also apply to sixth-form college academies but not to sixth-form colleges, which have remained as private sector bodies. Other than in sixth-form college academies, the restrictions do not apply to the further or higher education sectors.
The Enterprise Act established that individual payments made in respect of a public sector exit cannot exceed £95,000. The types of payment which are subject to restriction, as appropriate, are:
- redundancy payments;
- settlement agreement payments;
- early retirement payments made by employers;
- severance and other ex gratia payments;
- payments in respect of an outstanding entitlement;
- payments of compensation under the terms of a contract;
- payments in lieu of notice;
- payments in the form of shares or share options.
The £95,000 cap covers multiple payments provided to a public sector worker in respect of an exit from employment, for example, premature retirement compensation and voluntary severance payments. It also covers exits from more than one employer within a period of 28 consecutive days.
The NASUWT opposed the exit payment restrictions in the Enterprise Act, not least because they do not apply to the highest paid employees in the public sector in the nationalised banks and in the BBC, although they do apply to teachers.
However, the Government did not immediately follow the enactment of the Enterprise Act with Regulations to implement it, meaning that, in effect, the legislation could not be implemented.
In April 2019, however, the Government published draft Regulations and guidance for consultation giving effect to the provisions in the Enterprise Act. These enable amendment of the Teachers’ Pension Scheme (TPS) Regulations and also clarify the duties placed on public authorities to implement the Regulations.
The draft Regulations only apply to England and the extent to which parallel Regulations are implemented in the devolved nations is a matter for the devolved nations' governments.
Exceptions to the cap
Under the Government’s proposals, the £95,000 cap will not be implemented where:
- it would breach an obligation to make a higher payment under the TUPE Regulations;
- where a payment is made to avoid Employment Tribunal litigation in relation to detriment or dismissal arising from a whistleblowing complaint;
- where a payment is made to avoid Employment Tribunal litigation in relation to a complaint of discrimination under the Equality Act 2010.
Under the Government’s proposals, public authorities have discretion to relax the £95,000 cap where:
- there are compassionate grounds owing to genuine hardship;
- a higher exit payment is necessary to give effect to urgent workplace reforms;
- a higher exit payment was agreed before the date the Regulations take place and the delay is not attributable to the employee.
The NASUWT will respond to the Government’s consultation before it closes on 3rd July 2019. The proposed Regulations are not retrospective and do not impact on exit packages which are paid before the date the Regulations are implemented.
The NASUWT will issue further advice following the Government’s response to its consultation on the exit payments restrictions draft Regulations and guidance.
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