Cabinet
28 November 2011
Agenda Item No______16______
REVIEW OF THE DISCRETIONARY COMPENSATION POLICY FOR STAFF
Summary:
This report proposes changes to the current
Discretionary Compensation Policy to reflect the
continuing need to have a policy which is workable,
affordable and reasonable for the Council.
Conclusions:
A review has been undertaken of the current policy to
ensure that it continues to meet the needs of the
business and amendments have been proposed to
ensure that the scheme remains affordable.
Recommendations:
It is recommended (subject to consideration of the
formal consultation response from UNISON) to amend
the Discretionary Compensation Policy as outlined
within the report.
Cabinet Member(s)
Ward(s) affected
Contact Officer, telephone number and email: Julie Cooke, 01263 516040
Julie.cooke@north-norfolk.gov.uk
1.
Introduction
1.1
The Council introduced its current policy in 2009 to comply with The Local
Government
(Early
Termination
of
Employment)
(Discretionary
Compensation) (England and Wales) Regulations 2006.
1.2
Under this legislation, the Council is required to formulate, publish and keep
under review a policy statement setting out how any discretions will be
applied that are permitted under the Regulations. A copy of the current policy
statement can be found at Appendix O under section 4. The remainder of this
policy will be reviewed at a later stage.
1.3
The Council when reviewing the policy, are required to:a)
b)
have regard to the extent to which the exercise of their discretionary
powers unless properly limited, could lead to a serious loss of
confidence in the public service and;
be satisfied that the policy is workable, affordable and reasonable
having regard to the foreseeable future
Cabinet
28 November 2011
1.4
This review has been undertaken with a view to the above whilst balancing
the interests of staff who may face redundancy in the future against that of the
Council to manage change effectively.
1.5
The Council requires that business cases be completed for all redundancy
proposals and this includes the financial implications. The current policy does
state that the Council will aim to achieve a payback period of 3 years to cover
associated costs. In the majority of cases, the payback period is shorter than
this ensuring that the Council can demonstrate financial benefits to council
taxpayers that much sooner.
2.
Statutory redundancy payments
2.1
These are minimum guaranteed redundancy payments calculated on weekly
pay, age and length of service. Individual compensation payments are
calculated as follows:ƒ
ƒ
ƒ
0.5 week’s pay for each full year of service under the age of 22
1 week’s pay for each full year of service between 22 and 40
1.5 week’s pay for each full year of service aged 41 or above
2.2
A weeks pay is capped at £400 1 per week and is subject to a minimum of 2
years continuous service and a maximum of 20 years. Staff cannot be paid
less than the statutory amount. The statutory redundancy calculator is shown
at Appendix P.
3.
Options
3.1
The Council has the following options when reviewing the current policy:ƒ
ƒ
To retain the use of actual weekly pay rather than using weekly pay up
to the statutory maximum currently set at £400 per week
To reduce, remove or increase the multiplier (‘described in this report
as the enhanced multiplier’) calculated over and above the statutory
calculation
3.2
Other Councils have settled on different multipliers of between one and 3.4
(the maximum allowed). Human Resources have recently spoken to other
Councils in Norfolk and the range used at that point was 2.2 to 1.
4.
Current policy and proposed amendments
4.1
The Council has exercised discretion in the following areas:ƒ
ƒ
4.2
1
To use actual weekly pay rather than weekly pay up to the statutory maximum
To apply an enhanced multiplier to the statutory redundancy calculation. The
Council currently uses 2.2. An example of what this means in practice is
shown at table 1
Currently staff have to demonstrate that they have complied with the
Council’s redeployment policy (see Employee Adjustment Procedure) to be
eligible for an enhanced redundancy payment.
This is reviewed by the Government annually
Cabinet
4.3
28 November 2011
It is proposed that this multiplier is reduced from 2.2 to 1.5. An example of
costs are shown in the table 1 below. This example is based on an employee
aged 45 with 10 years service.
Table 1
Multiplier
Redundancy payment (£)
Statutory minimum (12 2 weeks x £400)
4,800
Current scheme (2.2 x 12 weeks) x 13,303.48
(actual weekly salary £503.92)
Proposed scheme (1.5 x 12 weeks) x 9,070.56
(actual weekly salary £503.92)
4.4
The Council has applied the statutory redundancy calculator (without using
the enhanced multiplier) using actual weekly pay to staff who have put their
name forward to be considered for voluntary redundancy. Any request for
voluntary redundancy is always subject to a business case being agreed.
4.5
The current practice may not provide an incentive for staff to put their names
forward for voluntary redundancy, where they are considering this. It is
therefore proposed that the enhanced recommended multiplier of (1.5) be
applied to both voluntary and compulsory redundancies. Harmonising this
way will ensure that there is no detriment to staff who might want to put their
names forward for redundancy in the event that redundancies are being
considered.
5.
Consultation
Consultation started with UNISON on 11 November and will run for 30 days.
Any response will be reported to Full Council for their consideration alongside
this report. Under the Regulations, the revised policy statement will only
become effective one month after it is published therefore, it is recommended
that the implementation date is 20 January 2012 enabling staff to be given
one months notice of the change.
6.
2
Conclusions
6.1
The new policy will provide a scheme which reasonably compensates
staff who are made redundant whilst balancing the requirement to be
workable, affordable and reasonable for the Council. It will allow the
Council to manage change through working with staff to use the
voluntary route for redundancy rather than compulsory where this
meets the needs of the business.
6.2
In addition to reducing the enhanced multiplier from 2.2 to 1.5, it is
also recommended that:
The number of weeks payable are obtained from the statutory redundancy calculator using the age
and number of years completed service of the member of staff
Cabinet
28 November 2011
a) The Council use the same multiplier for voluntary and compulsory
redundancies;
b) That the use of actual weeks pay is retained;
d) The revised scheme is effective from 20 January 2012 so that staff
can be given one months notice of the introduction of the revised
policy;
e) The policy is reviewed again in twelve months to assess the impact
of the changes and to see whether any other changes should be
recommended. The requirement to keep this policy under review is
outlined in the Regulations.
7.
8.
9.
Financial Implications and Risks
7.1
There are no increased risks through amending this policy. All
redundancies are required to have a fully costed business case which
is signed off by nominated Officers and Members at appropriate
stages.
7.2
If adopted, the proposals will allow the Council to reduce its overall
compulsory redundancy costs in line with current market conditions
whilst still providing staff with benefits which exceed the statutory
minimum. It is difficult to quantify savings at this point without knowing
which posts (and therefore which employees) are likely to be
redundant.
Equality and Diversity
8.1
An equality impact assessment was carried out on the current policy
in July 2010. As this report recommends changes to the discretionary
calculator from 2.2 to 1.5 and this will be applied equally to all eligible
staff, there is no evidence that the changes will impact adversely on
any of the equality strands.
8.2
The Equality Act 2010 provides a specific exemption for employers
who want to make redundancy payments which are more generous
then the statutory redundancy payments scheme. The exemption
allows an employer to use the formula of the statutory scheme to
enhance redundancy payments providing specific methodology is
followed and the changes proposed comply with this methodology.
Section 17 Crime and Disorder considerations
Not applicable.