Redundancy payments could be slashed as departments eye staff cuts

Civil Service Compensation Scheme changes set out in new consultation document would worsen 2010 terms
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The Treasury has pushed ahead with its stalled effort to curb civil service redundancy payments, as departments prepare to start whittling down their headcounts to meet the government's goal of cutting 91,000 jobs over the next three years.

Civil servants who take up their employers’ offers of voluntary redundancy would be entitled to only three weeks’ pay per year, up to an 18-month cap, under proposals set out in a consultation document today.

Those forced to take compulsory redundancy would have their severance packages capped at nine months’ salary.

The terms are a marked downgrade from those on offer at the moment – a month's salary a year, up to 21 months for VR and up to 12 months for compulsory redundancy.

The proposals are a continuation of long-running efforts to reform the Civil Service Compensation Scheme, and a direct continuation of a 2017 consultation on the subject.

But while reforming redundancy rules has been a long-running goal, the document suggests the government’s drive to cut one in five civil service jobs over the next three years has spurred the latest effort to move the reforms forward.

It says the CSCS “may be utilised by government departments as they restructure” under the Civil Service 2025 cuts programme.

Last week, it was reported that redundancy payments under the job-cuts programme are expected to cost around £2bn.

“The CSCS must support departments to achieve both best value for money and fair exit payments for those that leave employment,” says the paper, which was published without fanfare this morning and which sets the stage for continued consultation with unions.

The document appears to be the first time the government has publicly admitted that redundancies will form part of its strategy to cut staff.

However, internal guidance telling departments to model cuts of 20%, 30% and 40% to their staff in June to inform Civil Service 2025 planning revealed some compulsory redundancies may be needed to deliver the necessary cuts.

The consultation paper adds that the need to save money – the key goal of proposed reforms – is “heightened in light of the current economic climate”.

“In the current challenging economic context, the need to ensure that public finances are on a sustainable path and that the use of taxpayers’ money adheres to the fiscal rules proposed in October 2021 is paramount. As such, an affordable CSCS that combines value for money for the taxpayer and fair compensation terms is more important than ever,” it adds.

CSW understands progress on the 2017 proposals was delayed partly because of the coronavirus pandemic. A new round of consultation is needed to determine how to proceed, given the time that has passed since then, this month’s document says.

Many of the proposed changes to the CSCS are similar to those set out in the 2017 exercise.

However, there are some changes to the latest proposals – including a £26,000 minimum salary used to calculate entitlements “to protect the lowest paid”.

And the 18-month limit on payouts for voluntary redundancies and exits is three months higher than the cap set out in the 2017 proposals.

The reforms would also introduce a number of changes to pension arrangements.

And they would enable a partial pension buyout for officials who have reached the minimum pension age where their cash payment is not sufficient to fully buy out their pension.

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