SEVERANCE, EARLY RETIREMENT AND REDUNDANCY TERMS
Contents:
Scope
Key Points
Background
Voluntary Resignation
Compensation Schemes Provided by SG Sponsored Bodies
Employment Law
Scope
1. This section gives guidance on considerations to be taken into account in relation to compensation for severance, early retirement or redundancy. The guidance is aimed primarily at the constituent parts of the Scottish Administration (i.e. the core Scottish Government (SG), the Crown Office and Procurator Fiscal Service, SG Executive Agencies and non-ministerial departments) and bodies sponsored by the SG. However, other organisations to which the Scottish Public Finance Manual (SPFM) is directly applicable should ensure compliance with any relevant provisions and follow procedures consistent with the guidance.
Key Points
2. In considering terms for severance, early retirement or redundancy packages public bodies should ensure that issues of regularity, propriety and value for money are fully taken into account.
3. Any proposal by constituent parts of the Scottish Administration (including SG Executive Agencies and non-ministerial departments) or bodies sponsored by the SG to offer a financial consideration to secure the voluntary resignation of an employee outwith any existing (and approved) scheme must be approved by the relevant SG Finance Business Partner (or equivalent) and SG Human Resources Division before any offer is made, whether orally or in writing. Ministerial clearance must also be obtained as and when appropriate, including in relation to any potentially high profile cases.
4. The benefit structure and terms of compensation schemes for severance, early retirement or redundancy provided by SG sponsored bodies - or separately by any constituent parts of the Scottish Administration - should be set by reference to the arrangements in place within the core SG and set out in the Civil Service Compensation Scheme - as amended or replaced periodically.
5. A SG sponsored body must obtain prior approval from the SG for a new severance, early retirement or redundancy scheme or changes to a previously approved scheme. Approval lasts for the duration of the scheme. In arriving at a decision on approval the SG will consider comparability to SG equivalent schemes and to the overarching Civil Service Compensation Scheme rules currently in force, along with an assessment of the regularity, propriety and value for money offered by the proposals.
Background
6. In considering terms for severance, early retirement or redundancy packages - whether compulsory or voluntary - public bodies to which the SPFM is directly applicable should ensure that issues of legal and regulatory compliance, propriety and value for money are fully taken into account, alongside employee relations issues. Specifically:
- public funds must not be used wastefully or to underwrite inequitable or over-generous conditions of service, including severance;
- notice of termination of appointments should not be delayed in order to generate compensation payments in lieu of notice;
- where appropriate, ex-gratia severance or redundancy packages should be based on the arrangements set out within relevant extant terms and conditions of employment. In particular, prior consideration should be given to the availability of pension and compensation benefits within these conditions;
- special payments should be transparent and negotiated in such a way as to avoid conflicts of interest;
- offers of subsequent employment or consultancy work should be exceptional and only made where they represent value for money; and
- any undertakings about confidentiality should leave transactions open to proper public scrutiny.
Voluntary Resignation
7. Compensation is not normally payable when someone resigns voluntarily outwith any existing (and approved) scheme. Any proposal by constituent parts of the Scottish Administration (including SG Executive Agencies and non-ministerial departments) or bodies sponsored by the SG to offer a financial consideration to secure the voluntary resignation of an employee in such circumstances must be approved by the relevant SG Finance Business Partner (or equivalent) and SG Human Resources Division before any offer is made, whether orally or in writing. Ministerial clearance must also be obtained as and when appropriate, including in relation to any potentially high profile cases.
8. The case presented for consideration should include;
- an explanation of the circumstances of the case, including the legal assessment of the risk of litigation and likely outcome;
- confirmation that the relevant management procedures have been followed;
- an assessment of the value for money offered by the possible settlement, including a breakdown of each of the constituent parts of the proposed settlement and any associated contractual entitlements that may be relevant; and
- any non-financial considerations, eg where it is desirable to end a person's employment but dismissal is not warranted.
9. Compensation should not be offered in order to avoid normal management procedures, disciplinary action, unwelcome publicity or reputational damage. And even if the cost of defeating an appeal would exceed the cost of a particular settlement it may still be desirable to take the case to formal proceedings.
Compensation Schemes Provided by SG Sponsored Bodies
10. The benefit structure and terms of compensation schemes for severance, early retirement or redundancy provided by SG sponsored bodies - or separately by any constituent parts of the Scottish Administration - should be broadly similar to the arrangements in place within the core SG and set out in the Civil Service Compensation Scheme - as amended or replaced periodically. A sponsored body must obtain prior approval from the SG for a new scheme or changes to a previously approved scheme. Approval lasts for the duration of the scheme. The business case presented to the SG should include:
- the rationale for introducing / changing the scheme;
- mitigating action already taken or planned to avoid the need for headcount reductions e.g. recruitment freeze, redeployment, reductions in working hours;
- the terms available under the relevant compensation / pension scheme and the rationale for offering any terms other than the contractual minimum;
- the estimated annual costs and savings of the new / revised scheme over the payback period;
- details of how, by whom and over what timescale the costs of the scheme will be funded; and
- the impact that the restructuring / headcount reduction will have on the paybill.
11. In arriving at a decision on approval the SG will consider comparability to SG equivalent schemes and to the overarching Civil Service Compensation Scheme rules currently in force, along with an assessment of the regularity, propriety and value for money offered by the proposals. The SG's consideration of such schemes - coordinated by the sponsoring unit - must include consultation with:
-
the Finance Policy Team;
- the relevant Finance Business Partner (or equivalent);
- the Public Bodies Unit;
- Human Resources Division; and
- the Scottish Public Pensions Agency.
12. It should be assumed that the SG would not be prepared to approve any scheme that involved retention payments designed to encourage key staff to delay their departures.
Employment Law
13. Nothing in this guidance overrides the requirements of extant employment law . In particular, public bodies should have in place robust and transparent Human Resources policies. While employment law applies to employees and not to office holders such as NDPB board members, its principles do offer helpful guidance in dealing with all relevant cases and the same issues apply when assessing value for money in the wider public context. Practical guidance on the application of employment law is provided on the Business Gateway website.
14. In putting in place arrangements for voluntary exit schemes for severance, early retirement or redundancy and in reviewing employees' terms and conditions generally, bodies to which the SPFM is directly applicable should, as well as ensuring compliance with employment law, consider the interaction of any new proposals with existing contractual terms and the need to ensure flexibility in employment arrangements such that periodic changes to scheme rules can be accommodated.
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Page Published / Updated: January 2013