Civil Service Compensation Scheme: what changes are on the table for redundancy payments?

Reduced entitlements and a minimum salary threshold are among the proposed changes to the CSCS
Photo: Davie Bicker from Pixabay


Changes could be coming soon to the Civil Service Compensation Scheme, after a consultation document set out a series of proposed reforms to redundancy payments today. Here CSW looks at what the document says and what the changes would mean.

Why are ministers reforming the Civil Service Compensation Scheme?

Ministers have long wanted to reform the CSCS. Reforms introduced in 2010 aimed to cut costs – but a 2017 consultation document, which reflects on proposed changes set out the previous year, said the 2010 CSCS “was not fully delivering against its original aims”. Among other things, it said the scheme was “too expensive” and “out of line with the terms that the government considers should be generally available in the public sector”.

Are the changes connected to the Civil Service 2025 programme of job cuts?

The Treasury has said its rationale for changing the scheme remains the same as it has in the past – but has said it is “heightened in light of the current economic climate”. The document also outlines the government’s plans to cut 91,000 civil service jobs over the next three years as “supplementary context” to the reforms.

“It is now right that the civil service makes reductions following EU exit and the peak of the pandemic response. The CSCS may be utilised by government departments as they restructure. The CSCS must support departments to achieve both best value for money and fair exit payments for those that leave employment,” it says.

What is the cap on redundancy payments now and how could that change?

Under the current rules, agreed in 2010, civil servants taking voluntary redundancy or exit are entitled to one month’s salary for every year worked, up to a cap of 21 months’ pay.

A reduction to that entitlement in 2016, to three weeks’ pay per year worked, up to an 18-month cap, was reversed after a High Court ruling found the changes unlawful. The 2017 consultation later proposed cutting maximum redundancy entitlement to 15 months’ salary.

The latest proposals would reintroduce the three-week and 18-month limits. However, departments running voluntary exit schemes will have the option to offer three extra months, in a bid to keep redundancies to a minimum.

Compulsory redundancy payments would be capped at nine months' pay, down from 12 months.

There is some further flexibility over voluntary exit terms. Departments can offer up to twice the standard tariff on a VE scheme, up to a maximum of 21 months rather than 18, with Cabinet Office approval.

How do voluntary exit vs voluntary redundancy schemes differ?

When departments need to make redundancies, they are obligated to give staff who may face compulsory redundancy the option to leave first under voluntary redundancy terms. These terms must be made clear to them when they are told they could be made redundant.

Departments also have the option to open a voluntary exit scheme before this stage. They can open a VE scheme before consulting on compulsory redundancy, with the Cabinet Office’s approval. The latest consultation document says “are generally the best means of reducing staff numbers”, which is why departments have more discretion over the terms of a VE scheme.

What would be the minimum and maximum salary for calculating entitlements?

The proposals would introduce a minimum salary of £26,000 to be used to calculate entitlements “to protect the lowest paid”.

The maximum salary used to determine exit packages would remain capped at £149,829 – the figure set in 2010.

How did the Treasury come up with these proposals?

The proposals follow seven “principles for reform”, according to the consultation document: 

  • to support employers in reshaping and restructuring their workforce to ensure they have the skills required for the future;
  • to create significant savings on the current cost of exits and ensure appropriate use of taxpayers’ money;
  • to ensure any early access to pension provision remains appropriate;
  • to ensure efficiency compensation payments are appropriate for a modern workplace;
  • to support the flexible use of voluntary exits;
  • where possible, implement a set of reforms that are agreed by trade unions
  • to align with the principles of compensation scheme reform expected across the public sector.

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