Permanent secretaries have been given greater authority to approve special severance payments in updated Treasury guidance – the second such update in four months.
Accounting officers – usually departmental perm secs – will now be able to approve special severance payments of any value without seeking Treasury approval, as long as the payments are not “novel, contentious or repercussive”. Previously, they would have needed the Treasury to rubber-stamp any payments of £100,000 or more.
Special severance payments are paid to employees, officeholders, workers, contractors, and others outside of normal statutory or contractual requirements when leaving employment in public service – whether they resign, are dismissed or reach an agreed termination of contract.
They include payments made under a settlement agreement, compensation in lieu of notice and hardship payments; but not statutory or contractual redundancy payments, payments for untaken annual leave or payments ordered by a court or tribunal.
Until this summer, all special severance payments needed Treasury approval, according to guidance published in 2021.
In July, the guidance was updated to say departmental accounting officers had the authority to approve special severance payments under £100,000 for employees that were not novel, contentious or repercussive – except where the payment involves a member of the civil service; a special adviser; a board-level individual at an arm’s-length body; or anyone earning over the senior pay threshold.
Accounting officers can now approve special severance payments of any value as long as they are not novel, contentious or repercussive – but they must still get Treasury approval for payments that fall under any of these categories.
And novel, contentious or repercussive payments worth £300,000 or more require the approval of the chief secretary to the Treasury.
Previously, the chief secretary’s sign-off was needed for any special severance payments worth more than £100,000, or in cases where the employee earns over £174,000. “This is because payments of this nature and size are particularly novel, contentious, and repercussive,” the previous guidance said.
A payment is considered novel, contentious or repercussive if lawyers have assessed the chances of the government successfully defending the matter in a court or tribunal as more than 50%, or the department believes there is no significant risk of legal challenge; or it is to a special adviser or any individual earning over the senior pay threshold.
A payment would also fall under this category if it is unaffordable (special severance payments “must not add unfunded pressure to departmental in-year spending budgets”, the guidance says); or if “likely to set a precedent or have implications for wider government policy or other settlements”.
As in previous iterations of the guidance, the document says arm’s-length bodies should seek approval from the accounting officer of their sponsor department for all special severance payments, regardless of value.
Yesterday’s update clarifies that ALBs include NHS organisations.
The guidance has been published as the Department for Social Care prepares to absorb NHS England. The merger will see an overall reduction in headcount across the two organisations of around 50%.
While the latest update has loosened controls on some payments, it also omits a section that appeared in previous iterations of the guidance giving departmental accounting officers the authority to approve early severance cases connected to an upcoming redundancy programme. This enabled accounting officers to approve payments worth less than contractual redundancy entitlement to employees leaving the organisation ahead of a formal voluntary or compulsory redundancy payment process – even if the payments exceeded the £100,000 threshold over which Treasury approval would otherwise have been required.
The new guidance says spending teams can still choose to seek ministerial approval “for any other case as they deem appropriate”.