Following a consultation earlier in the year about applying a £95,000 cap to exit payments for public sector workers, the government has now drafted regulations setting out how the cap will work.

Regulation 3(1) of the Public Sector Exit Payment Regulations 2016 sets out the payments to which they will apply. These cover payments for dismissal by reason of redundancy; payments made following a voluntary exit; payments to reduce or eliminate an actuarial reduction to a pension on early retirement; payments to extinguish any liability to pay money under a fixed-term contract; payments made by way of shares following a loss of employment; and “any other payment made as a consequence of, in relation to, or conditional upon, loss of employment whether under a contract of employment or otherwise”.

Despite this catch all provision, certain payments are expressly excluded. Regulation 3(2) excludes payments that are made in respect of incapacity or death as a result of accident, injury or illness; payments made to firefighters who retire early in accordance with certain fitness provisions under their pension scheme; any payments made in respect of contractual leave that was due but not taken; bonus payments due under a contract of employment; and any payments made to comply with a court order.

The regulations allow certain bodies to relax the restriction on the payment of exit payments. If they use this power then records of the exercise of that power and the reasons for it must be recorded for at least 36 months and published in the annual accounts.

Finally, the regulations apply to all bodies within the public sector except those specified in Schedule 1 such as the Royal Bank of Scotland, Northern Rock, Bradford and Bingley, the Bank of England, the Financial Conduct Authority and the armed forces, among others.

Gerard Airey of Thompsons Solicitors commented that “this is a further attack by the Government on public sector employees, this time well paid employees who carry out complex roles. The effect of the Regulations is that highly paid employees with long service will not receive what they are contractually entitled to when they leave employment. It’s noticeable that the Government have exempted their friends in public sector banking from this restriction.”

To read the regulations in full, go to: