Unions voice concern over plan to cap public sector payouts

FDA and PCS unions sound the alarm over proposals to end "six figure" public sector redundancy pay

By matt.foster

27 May 2015

Plans to cap redundancy payouts for public sector workers have come under fire from unions amid fears the move could undermine voluntary exits.

The Enterprise Bill, unveiled in Tuesday's Queen's Speech, promises to limit redundancy deals for outgoing public sector staff to under £100,000. According to the Treasury, more than 1,800 public sector employees took six-figure payouts in 2013, with ministers saying they are now "minded" to limit such payouts to £95,000.

"It is not right that working people should have to fork out for golden parachutes worth hundreds of thousands of pounds for public sector workers when they are made redundant," chancellor George Osborne said.

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But the proposals – which the Treasury has said it will now consult on – have been challenged by the FDA union, which has warned that any attempt to apply a cap to the civil service would go against the spirit of a 2010 deal and harm efforts to encourage public sector workers to take voluntary redundancies.

At the start of the coalition's time in office, then-Cabinet Office minister Francis Maude was involved in talks on the Civil Service Compensation Scheme with six civil service unions – including FDA, Prospect, GMB, Unite, and the POA. He hailed the resulting deal, which followed extensive talks and culminated in the Superannuation Act, as being "fair for civil servants and fair for other taxpayers".

Maude's final 2010 settlement capped payouts for officials subject to compulsory redundancy at 12 months' salary, while those choosing voluntary exit are entitled to 21 months' pay.

The FDA – which represents more than 18,000 senior officials – believes that any proposal to set an upper limit on the size of payouts could result in fewer long-serving staff leaving of their own accord as the government mulls further public sector job cuts.

"We had a very difficult set of negotiations [in 2010] and we agreed changes to the compensation that people would get if they were made redundant," Rob O'Neill, the union's assistant general secretary told CSW.

"In some cases that meant worse terms, in some cases better. But we felt reaching agreement would make this a long-term pledge to bind the government – so obviously we are very surprised at this change just five years later.

He added: "Quite often you can persuade people they can leave earlier than otherwise planned because you're offering them an attractive package. This could affect a lot people in middle ranks, people like nurses, people like firefighters and others across the public sector.

"£95,000 sounds like a lot of money but if people are volunteering to go and have been in public service a long time and have built up a pension, that's not always the case. You will end up with more compulsory redundancies and create a situation that most employers would want to avoid."

The PCS union, which has more than 200,000 members who work in the public sector, also warned against any attempt to alter officials' terms.

"Dedicated and long-serving public servants deserve to have the terms and conditions on which they signed up for the job honoured, rather than made a political football by politicians playing to the gallery," a spokesperson said.

The government argues that the plans – which were included in the Tory election manifesto – will end the situation of taxpayers on low salaries funding "huge payouts when well-paid people get made redundant".

A Treasury spokesperson told CSW that the government would be seeking a range of views – including from unions – before making any decision on the scope and implementation of the cap.

Update: This story has been amended from the original version that appeared online in order to correct details of the Civil Service Compensation Scheme. The original copy said staff opting for voluntary redundancy were entitled to up to 15 months' pay. The correct figure is 21 months. Apologies for the oversight. You can read a more recent story giving details of the Treasury consultation here

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