HM Treasury Consultation on a Public Sector Exit Payment Cap.
UNISON Response August 2015
About UNISON
1. UNISON is the UK's largest public service trade union with 1.25 million members, 1 million
of them women. Our members are people working in the public services and for private
contractors providing public services including in the essential utilities. They include
frontline staff and managers working full or part time in local authorities, the NHS, the police
service, colleges and schools, the electricity, gas and water industries, transport, nondepartmental public bodies and the voluntary sector. Whilst we have members at all pay
levels across the sectors, many of our members are part time and low paid, working in
traditionally low paid sectors like care, catering, security and cleaning.
Comment on the consultation deadline.
2. It appears that this consultation breaches the government’s own Consultation Principles
policy in giving just 4 weeks for a response during a holiday period.
3. This consultation has been issued without taking into account that “timeframes for
consultation should be proportionate and realistic” and that “where the consultation spans
all or part of holiday period” policy makers should “take appropriate mitigation action”.
4. Clearly, as the consultation timeframe is entirely within the holiday period (launched on
28th July and over by 27th August), this should have been mitigated against with additional
time being given to respond.
5. The timeframe as it stands does not allow sufficient time for affected bodies to respond as
robustly as possible.
6. UNISON would hope that the government recognises that it is in breach of its own code
and engages in meaningful consultation with all affected bodies prior to any conclusions
being implemented.
Response Summary
7. UNISON believes that, in light of the extent of public service budget cuts and the proposed
future cuts, these new proposals to cap exit payments in the public sector are entirely
punitive, representing yet another attack on public service workers and the services they
provide.
8. This initiative would tear up collective agreements and negotiated settlements, many of
which are still in the process of being agreed directly with government departments, at a
time when the flexibility required by employers to negotiate redundancies could not be
more acute.
9. The consultation suggests that public sector exit payments are “disproportionately large”
without any comparable data to back up this claim. The consultation later admits that the
average exit payment in the public sector is only £25,000.
10. In the interests of transparency, the government should provide additional data to explain
why it believes the exit payments to be disproportionate compared to the wider economy.
UNISON disputes this is the case.
11. We are concerned at the lack of clarity around payments in relation to settlement
agreements. It is unclear whether these proposals would impact on early conciliation
settlements such as discrimination settlements and COT3 agreements.
12. It is clear that the proposals, as they stand, will not only affect high earners but will also
impact on moderate earners such as nurses, midwives, social workers and librarians with
long service in public services.
13. Public service workers often devote years of loyal service: the government’s own evidence
on sector comparators makes it clear that many professionals working in the public sector
could earn greater salaries in the private sector.
14. The government will be aware that all staff in the public sector have been faced with
reduced budgets, fewer resources and increased workloads. The fact that public service
workers currently feel overstretched and that their good will is being abused is well
documented.
15. These constant attacks directed at public service workers and the services they provide
(which we all rely on), are having a huge effect on morale, employee relations and
recruitment, with a new crisis in recruitment to essential services seemingly being
highlighted weekly.
16. These proposals will make the delivery of other government objectives and the
management of change significantly more difficult.
17. UNISON believes the proposals, as they stand, require a great deal more thought and
seem largely unworkable.
18. Under these proposals, an individual’s length of service or age may impact on decisions
made in relation to service planning that could lead to inefficient reorganisation plans.
19. We believe the proposals will affect service planning and industrial relations in ways that
the government may not have anticipated.
20. UNISON fundamentally believes that the damage done to industrial relations, both locally
and nationally, and the impact on staff morale and the employers’ ability to facilitate
necessary change is too high a price to pay for what may amount to (after waiver process
and the likely consequence of sub optimum reorganisations) very moderate savings to the
government purse, if any.
Unintended consequences – impact on lower paid staff
21. Despite the government’s rhetoric suggesting this proposal is aimed at payouts to senior
members of staff on high salaries, there is no lower income cap to protect those on more
moderate incomes from being affected. By our calculations the measures, as currently
outlined, clearly represent an attack on moderate earners, such as midwives, social
workers, youth support workers, environmental officers and librarians, with long service
who happen to be near retirement when their employment is terminated through no fault of
their own.
22. Despite initial announcements suggesting that staff on salaries lower than £27k would not
be affected, the new proposals clearly affect employees on very moderate salaries who will
have dedicated years of their life to public service, rather than highly paid staff with short
service who will remain relatively unaffected.
23. This policy will penalise staff who may have worked for decades on low pay to provide
public services through thick and thin and are now facing a termination of their employment
as a result of the government’s austerity agenda.
24. In time, this policy will impact on staff on even lower salaries as pension protections expire
and the impact of pension “strain” calculations increases.
Unintended consequences – impact on necessary reorganisations at a time of
severe budget cuts to services
25. We believe these proposals will place unnecessary burdens on employers and employees
and will affect service planning and industrial relations in ways that the government may not
have anticipated.
26. The consultation document itself recognises that “Exit payments are important in their
ability to allow employers to reform and react to new circumstances. Employers will
normally make every effort to find alternative employment for employees where their
services are no longer required. However, where this is not possible, exit payments
can facilitate reorganisation and reform while providing support for employees that
helps bridge the gap to new employment.” It then immediately goes on to propose strict
limits on enabling this to happen.
27. Employers in all sectors recognise and appreciate that incentivising voluntary exits is
advantageous when seeking to change the size and shape of an organisation.
28. In changing the goal posts in the middle of an extended period of large scale reorganisation
without consideration of an initial period of protection (particularly for staff currently over
50), the government is further limiting the opportunity for employers to fairly reconsider
strategic and operational decisions made in previous reorganisations that may have been
planned to be effected in stages while assuming current agreements and policies would
apply.
29. These proposals seems particularly disconnected from work in other government
departments, some of which are currently in the process of finalising detailed negotiations
on exit payments. They utterly disregard the “25 year guarantee” of no more interference
on public sector pension scheme entitlements, recently agreed at the highest levels of
government, entitling members to a pension unreduced by early retirement factors.
30. UNISON is surprised at the decision to unilaterally override recently revised terms and
conditions which undermines even the government’s own employer representative
organisations when it comes to bargaining.
31. Quite apart from the restrictions this will place on negotiated settlements and collective
agreements regarding exit payments, by including pension costs of contractual entitlement
to early retirement within the cap, these proposals instantly begin to affect employees on
much lower salaries and also to affect an employer’s ability to make decisions to reduce
staff numbers based on efficiency alone.
32. Under these proposals, an individual staff member’s length of service and age could
become determining factors in employers seeking to avoid the complication of this arbitrary
cap. We do not believe this is the government’s intention.
33. The proposals could potentially leave current employees, even on very moderate salaries
(as low as £25k in areas such as the Environment Agency and people on salaries of
around £32k and above in Local Government) finding themselves having to pay upfront
costs to their pension scheme for the ‘privilege’ of losing their jobs at a time in their lives
when they are going to find it very difficult to obtain employment elsewhere.
34. As time goes on, and current pension protections wither on the vine, staff on even lower
salaries will be affected across the board. Staff on as little as £20,000 a year could be
affected by this cap if they are over 55 when made redundant and their normal retirement
age is 65 or over.
35. It seems evident that the cap might make it impossible for some staff to be made redundant
as the cap would not meet the cost to the pension scheme. Urgent clarification is needed to
ascertain what would be the expected outcome of this situation.
Impact on early conciliation settlements
36. UNISON is very concerned at the lack of clarity on exit payments relating to early
conciliation and settlement agreements.
37. This policy proposal conflates two different sets of circumstances through which staff are
compensated for leaving a job: those where organisations use a payment to avoid facing
legal claims; and those where jobs are removed and staff are made redundant. The former
are generally used in situations where an employer would otherwise need to respond to
litigation.
38. We are extremely concerned at the potential impact on discrimination claims; COT 3
compromise agreements and ACAS settlements and require further clarification on these
issues. Just one example of where this would be of particular concern is the potential
impact on NHS staff using whistle blowing legislation to protect them from discrimination
arising from raising concerns about patient care.
Equality impact and future proofing
39. The consultation mentions an equality impact assessment. There is a suggestion that the
cap is likely to affect older workers but there is no analysis as to whether these proposals
are justified (and we would say they are not). Given that there are proportionately more
women and part-time workers in public service jobs than in the wider workforce it follows
that there is also likely to be a gender impact.
40. As with last year’s consultation on the Recovery of Exit Payments, there is no mention of
the cap being index linked at all. Without the cap being index linked it will begin to impact
on staff on lower and lower salaries and makes any stated rationale meaningless. If these
proposals come into force, at the very least we would need to see the cap raised each
year, and linked to average earnings growth or RPI, whichever is higher. Otherwise, these
rules will simply become more and more unfair each year.
41. Whilst our concerns with these proposals are wide ranging and cover all areas of the public
sector, we would like to highlight some areas of particular concern as follows:
Impact of the Local Government Pension Scheme Regulations
42. The consultation acknowledges the specific entitlement within the Local Government
Pension Scheme (LGPS) Regulations to an immediate and unreduced payment of accrued
pension to those scheme members aged 55+ where employment terminates on the
grounds of redundancy or efficiency. This has been an integral part of the LGPS
Regulations which was retained in the last pensions settlement – and were supposed to
provide certainty about pension rights with no need for change for twenty five years.
43. In some areas, such as the Environment Agency, staff are entitled to enhanced
redundancy costs AND access to an unreduced pension if they are made redundant after
55.
44. However, the government is clear that local government should be subject to the cap in the
same way as central government departments and that this will necessarily apply to the
value of the early retirement package. The proposal states that employees would retain the
right to take the unreduced pension immediately in such circumstances, but that the extra
cost to the employer should not exceed the £95,000 cap (less any other termination
payments that have been made). This is entirely unworkable. It is unclear what would
happen in circumstances where the cap was exceeded as a result of the “strain payment”
to the LGPS where a statutory entitlement to immediate and unreduced benefits existed.
45. It is no great leap to conclude that this will have significant impact on how staff are selected
for redundancy and that this would hinder employers from determining the most efficient
selection criteria for their planned reorganisations.
46. When looking at redundancy situations that trigger an entitlement to an unreduced early
retirement, it is easy to demonstrate how this might affect people on moderate incomes as
detailed below. However, it is noticeable that, unlike other similar consultations, the
government has not taken the opportunity to demonstrate worked examples.
Assuming most of those over the age of 55 might well be entitled to the maximum statutory
redundancy payment of just over £14k then that will only leave £81k for strain payments.

Example A: - For an employee with partial rule of 85 protection made redundant at
55 on £30,000 pa with 35 years service, the strain payment could vary depending on
fund actuary between £67,750 to around £84,700. Plus the £14,000 statutory
redundancy payment would put this member at risk of exceeding the cap based on
the assumptions used by the fund actuary.

Example B: - An employee of the Environment Agency with partial rule of 85
protection on £25,000 pa after 35 years service using a strain payment at the lower
range of £56,000 would still exceed the proposed cap. Based on the current VER
scheme the member would get also be entitled to a redundancy payment of £38,942
(i.e. 81 weeks x £25000) in addition to the strain payment.
47. As time goes on it will catch more people as average critical retirement age increases and
strain costs will increase.
48. Already, it should be noted that staff transferring into the LGPS with long service may
already face a much higher “pension strain calculation” than established staff as they would
not have protections on their normal retirement age (NRA) and would have an NRA of 65 or
more meaning a larger “strain payment” is required to cover early retirement.
49. Urgent clarification is needed as to whether these proposals are expected to require a
change to the LGPS regulations which would, in effect, immediately tear up the agreement
to protect these arrangements for 25 years.
Inconsistency / planning delays in calculating pension strain
50. The matter is further complicated by the fact that funds use fund-specific factors which aim
to give a better match to the cost to the particular fund. It is inequitable that the value of
these costs will be determined on a different basis, depending on which LGPS Fund (or
indeed public service scheme) was involved. We would potentially then have two
measures for the same thing – the amount the employer is charged by the Fund and how it
is valued against the limit.
51. The delays caused by checking with the relevant actuary as to whether the individual
pension strain calculations do or do not breach the cap prior to making service planning
decisions seem unnecessarily onerous and may involve additional costs to the scheme for
each new speculative calculation.
Waiver process
52. We are unclear what the waiver process would be for LGPS members not employed
directly by a Local Authority where there is no recourse to a “full council” waiver process.
This will affect thousands of public service workers and would seem to be a huge
disadvantage for those not employed directly by a Local Authority.
Impact on the NHS
53. Within the NHS, an exit payment is made according to Section 16 of the NHS Terms and
Conditions of Service handbook. This section (and the basis for calculation of redundancy
pay) is consistent for all NHS staff, including medical grades.
54. This consultation fails to address the realities of a career in the NHS where the majority of
staff train for specific roles and develop skill sets that are just not required outside of the
healthcare sector.
55. This means that if they are made redundant it will be much harder to find re-employment in
other sectors and the skills honed for a life of public service within the NHS will lead to
lower paid work requiring re-training which becomes much harder after decades of service
and nearer retirement.
56. This is why, after extensive negotiations it was agreed that Section 16 redundancy
payments are set by a formula that recognises length of service as its key element.
57. Data from the Electronic Staff Record Data Warehouse show that in the period 2011-2015,
just under 21,000 NHS staff were made redundant in England.
58. In the years 2011-2013, around a third of redundancies were within the SHA and PCT
sectors, most likely to be a direct consequence of ‘transition’ to the new structures created
by the 2012 Health and Social Care Act. However, in each year between 2011 and 2015,
over half of redundancies were for jobs in acute and community and mental health settings.
Staff affected in the NHS
59. The cap as proposed would affect redundancy payments for a wide range of NHS staff,
and would not be limited to groups that the public would view as ‘executives’. Because
redundancy calculations are made on the basis of earnings, and because a significant
number of NHS staff work unsocial hours, capping the payments could affect staff in bands
6 and above of the Agenda for Change pay scale. Jobs falling in Band 6 include the
following roles:
Nurses
Midwives
Theatre Practitioners (sometimes called Theatre Nurse Specialists, Operating Department
Specialists or Anaesthesia Practitioners)
Paramedics
Pharmacists, biomedical scientists and other healthcare scientists
60. Please note that these roles have been highlighted for the purposes of illustration, and are
not an exhaustive selection of roles which would be in scope of the payments as described.
61. The proposed cap appears to fly in the face of direct negotiations with the Department of
Health and particularly the recently agreed £80k salary cap on calculations in the NHS
whereby a maximum 24 month redundancy payment would not exceed 160k.
Bodies in scope in the NHS
62. In expanding the scope of the proposed cap to publically funded services under
independent/private sector delivery, it is unclear whether the scope of the proposals would
include all employers who deliver services under an NHS Standard Contract. Since the
2012 Health and Social Care Act came into force - and through implementing measures
associated with safe staffing levels and quality of care - the Department of Health and the
new NHS bodies have undertaken significant work to apply consistent levels of regulation
and scrutiny across the whole healthcare system. This is an area where the NHS trade
unions have worked in partnership with the NHS and the Department of Health, for
example in creating a provision which allows ‘independent providers’ of NHS services to
access the NHS Pension Scheme, for the purposes of removing blocks to recruitment and
retention of healthcare staff where clinical services are commissioned outside of the NHS
under the NHS Standard Contract.
63. Clarification is needed on what basis non-NHS providers of NHS services are excluded
from the scope of the proposals before we can comment.
Impact on current negotiations on the NHS Redundancy scheme
64. Earlier this year, NHS trade unions entered into an agreement with NHS Employers and the
Department of Health to apply an absolute cap on exit payments and set an £80k earnings
cap on the calculation of NHS redundancy pay for staff in England. This means there is
already a cap agreed at a maximum of £160k.
65. This cap delivered on the Department of Health’s objective of capping high payments
made to senior staff with short levels of service; whilst not penalising those with long
service in mid-range salaries and earnings which include payments for working around the
clock. Following consultation with members of NHS trade unions, this agreement was
incorporated into NHS terms and conditions from April 2015.
66. NHS trade unions have since been in negotiations with employers and the Department of
Health on further changes to the NHS redundancy scheme. The Department of Health has
been keen to use this latest round of talks to introduce a staggered ‘clawback’ of
redundancy payments where staff were re-employed within 12 months, and a taper of
redundancy calculations for staff approaching retirement age. The NHS trade unions have
been keen to use the talks to limit the need for payments through establishing better scope
for redeployment of staff at risk of redundancy. Whilst there are still some issues of minor
detail to iron out, these talks have been productive, and it had been the aim of the
negotiators to use the summer period to consult members on draft proposals. However,
the announcement of the 95k cap has set this timetable back significantly and has the
potential to permanently de-rail this piece of work.
67. Not only will it be impossible - prior to regulations passing - for negotiators to understand
and explain the exact impact of the cap on the clawback and taper mechanisms; but
altering a collective agreement through legislative routes is likely to inhibit confidence of
trade unions and their members and employers in collective decision-making and industrial
relations in the NHS and further undermine the trust and confidence of NHS staff in the
Government.
Conclusion
68. UNISON believes these proposals will significantly hinder negotiations and agreements
being made for necessary public service reorganisations and efficiency savings. These
proposals will have a hugely negative impact on industrial relations and staff morale at a
time of huge change.
69. Trust in collective agreements, made even at the highest of levels and covered by statute
will become meaningless as these proposals can only be construed as another attack on
public servants, the public sector and trade unions.
70. Without consideration of an exemption for staff on low to moderate salaries, such as
midwives, social workers and librarians, this proposal will hit long serving older staff
disproportionately just as their ability to find a new career diminishes.
71. We also believe that the government should recognise that both employers and employees
may have made very different decisions in recent reorganisations if they had understood
that this new limit on the flexibility of exit payments was going to come into force.
72. In changing the goal posts in the middle of an extended period of large scale reorganisation
without consideration of an initial period of protection (particularly for staff over currently
over 50), the government is further limiting the opportunity of employers to fairly reconsider
strategic and operational decisions made in previous reorganisations that may have been
planned to be effected in stages while assuming current agreements and policies would
apply.
73. UNISON is opposed to these proposals, but if the Government insists on implementing
such a cap, we call on the Government to;

raise the cap significantly and index it in line with pay and prices

exclude pensions from calculations, and

exempt low to moderate earners from coverage

allow for an initial 5 year protection period (particularly for staff over 50)
74. All staff in the public sector have been faced with reduced budgets, fewer resources and
increased workloads. The fact that public service workers currently feel overstretched and
that their good will is being abused is well documented.
75. The recent string of attacks on public service workers is being felt keenly by staff and it is
no surprise that recruitment is beginning to be a key issue in some essential services such
as social services and the ambulance service.
76. UNISON believes the proposals, as they stand, require a great deal more thought and
seem largely unworkable.
77. Under these proposals, an individual’s length of service or age may impact on decisions
made in relation to service planning that could lead to inefficient reorganisations.
78. We believe the proposals will affect service planning and industrial relations in ways that
the government seem not to have anticipated.
79. UNISON fundamentally believes that the damage done to industrial relations, both locally
and nationally, and the impact on staff morale and the employers’ ability to facilitate
necessary change is too high a price to pay for what may amount to (after waiver process
and the likely consequence of sub optimum reorganisations) very moderate savings to the
government purse, if any.
For more information please contact Michelle Singleton (m.singleton@unison.co.uk), Policy
Unit or for issues relating to the pensions related aspects of this response please contact Glyn
Jenkins (g.jenkins@unison.co.uk), Pension Unit.