Civil Service Compensation Scheme: will you be affected by the redundancy shake-up?

As the Cabinet Office makes its final offer to unions on planned reform of the Civil Service Compensation Scheme, CSW's Matt Foster takes a detailed look at the key changes to redundancy terms

By Matt Foster

27 Sep 2016

The Cabinet Office has just published its final offer to unions as it seeks to make fresh changes to the Civil Service Compensation Scheme. 

The plans outlined by the government on Monday propose cuts to all three forms of civil service exit payout — for voluntary exits, voluntary redundancies and compulsory redundancies — as well as shorter redundancy notice periods for new starters and changes to early access to pension provision.

According to an Equality Impact Assessment published alongside the proposals, the civil servants who will be hardest hit by the changes are those aged 50-54 — who stand to lose out because of changes to early pension access — and those with long-service in the organisation, who will be unavoidably hit by cuts to both the maximum payouts and the tariff used to calculate them.

It's important to note that the analysis is based on the original Cabinet Office proposals, which the government says it will press ahead with should unions fail to accept its revised offer. The key difference between the two proposals is the higher cap for voluntary redundancy and voluntary exit payouts in the union-negotiated settlement, meaning the final impact of the changes could be less severe than outlined in the Cabinet Office's document.

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Changes to unreduced pension access will have the biggest impact on those aged 50-54 

Currently, civil servants have the right to draw on some or all of their pension from the age of either 50 or 55 (known as the Minimum Pension Age), depending on when they joined the scheme. Officials who choose to do that are given lower payments to reflect the fact that they will be paid for a longer period.

Under the current terms of the CSCS, however, exiting staff can take early payment of their pension at an unreduced rate once they have reached the Minimum Pension Age of either 50 or 55, with employers topping up those payments if they are not covered by the exit package.

The initial changes proposed by the Cabinet Office would instead see employer-funded pension top up available only to staff over 55 — bringing an end to a system in which some staff below 55, who were members of civil service pension schemes, before 2006 qualified for top ups.

The government’s analysis says that the mean value of Voluntary Redundancy and Voluntary Exit packages for those in the 50-54 age bracket “is currently significantly higher than for other age groups”, and that the changes to pension access would see them receive payouts “that are more comparable with those for other age groups”.

As the Cabinet Office's own figures below illustrate, while all age groups are likely to see a significant fall in the value of their redundancy package under the proposals, the changes will be most keenly felt by those aged 50 to 54 who opt for voluntary redundancy or voluntary exit.

The plans would see the mean cost of both voluntary exits and voluntary redundancies for staff aged 50-54 fall by more than half, from £64,300 under the current scheme to £30,600 under the new one.

While the Cabinet Office acknowledges that this means there is a “potential direct discrimination” for staff in this age group, it argues that this change is  “proportionate” because it removes an anomaly “where this group can currently receive significantly higher payments than those in different age groups” or in the same age group but with a higher minimum pension age.

Long-servers will be hit by both the tariff cut and maximum payout caps

Another big change outlined by the Cabinet Office this week is the cut in the "tariff" rate used to calculate exit payouts. Under the current scheme, departing officials are entitled to a month’s salary per year of service. Those opting for voluntary exits or voluntary redundancy can be paid up to a maximum of 21 months’ salary, while, for those who stay on longer and end up receiving compulsory redundancy, the cap is set at 12 months’ salary.

The revised scheme will see that tariff cut to three weeks, so staff leaving the organisation would be entitled to three weeks’ pay for every year of service. The caps for all three forms of exit are also being lowered — to 18 months’ for voluntary exits and voluntary redundancies (or 15 if unions reject the offer), and 9 months for compulsory redundancies.

Again, the Cabinet Office assessment looks only at the initial 15 month voluntary exit and voluntary redundancy cap proposed in the Cabinet Office consultation and not the 18 months offered to unions.

But it says that because of the “strong  correlation  between  age  and  length  of  service  means” there is is “a risk of indirect discrimination” for three groups.

Staff who have under 15 years of service will experience a loss of entitlement because of tarriff changes. the assessment says, while those with between 15 and 22 years of service “will see a steadily increasing change, depending on how far above 15 years they have served”, hit by both the changes to the tariff and the lowering of the caps.

Meanwhile, those who have served for more than 22 years will, the Cabinet Office says, “experience loss due to the cap no matter what length of service”. This is because a member of staff who would have qualified for a 21 month payout under the current scheme will now see it limited to 15 or lower.

However, the assessment  adds: “They will experience comparatively less of a drop than those who have been in service for 21 years. Once 21 years of service has been reached, the loss of absolute and relative value begins to decline.”

Senior civil servants are now covered by new rules designed to limit redundancies

Not mentioned in the Cabinet Office’s Impact Assessment, but hailed as a concession by unions who took part in talks on the revised scheme, is a new protocol agreement covering redundancies across the civil service, which is designed to avoid the need for exits wherever possible.

The new agreement — which departments are expected to comply with within six months of the scheme coming into force — will require employers to undertake “quality workforce planning” before launching a programme of job cuts that could result in redundancies. 

The protocol also sets up a new, cross-civil service working group to help find redeployment opportunities for staff at risk of redundancies. 

The proposed new guidance, which will replace 2008 and 2014 protocols, covers staff in the senior civil service for the first time, and says employers who have identified “potential long-term” reductions in their workforce will be required to share information with other departments at an early stage “so redeployment of employees can be considered before an exit scheme is necessary”.

Civil service employers will also, according tot the new protocol, be expected to provide support to employees at risk, which could include keeping them updated on jobs in the civil service and beyond, offering help with CV writing, refreshing training and interview preparation “as appropriate”.  

“Employees should have all the information they need to make an informed decision about voluntary redundancy,” it says .”This will include the employee being aware of what their expected compensation would be should they leave employment on VR.”

Note: This story has been updated to make clear that the Cabinet Office analysis is based on the version of the scheme it will impose should unions fail to accept its revised offer

For more on the background and trade union reaction to the Compensation Scheme changes, click here

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