The Government has decided to revoke a cap on public sector redundancy payments which was implemented at the end of last year. 

A cap which limited public sector redundancy payments to £95,000 has now been revoked after unions took legal action against the Government.

This cap, intended to prevent excessive pay-outs for high earners, was harshly criticised by unions who stated that this cap would impact long-serving local Government staff the most. This is due to the fact that the cap includes the contributions which employers make to pension costs.

Christina McAnea, Unison’s general secretary, said:

It’s great the government has finally seen sense and stepped back from this damaging regulation that threatened to blight the retirement of millions of workers.

Through no fault of their own, long-serving staff over the age of 55 and facing redundancy would have been hit by the regulation. Because they’re obliged to take their pensions if they lose their jobs, when combined with redundancy payments the final amount could have exceeded the £95,000 cap.

The government has wasted much time and money and should now abandon any plans to reintroduce the regulations. Instead, ministers should concentrate on supporting dedicated public service workers who are delivering for their communities in the most challenging of circumstances.

As such, the Treasury has since published guidelines which encourages employers to pay employees who were made redundant and left between 4 November and 12 February the amount they would have gotten if the cap was not instated.

However, others such as John O’Connell, the Chief Executive of the TaxPayers’ Alliance, disagreed with the decision to repeal the cap. He stated the necessity of replacing the cap with a different limiting measure or otherwise risking “private sector workers who have faced a year of unprecedented hardship” being “once again … forced to foot the bill for golden goodbyes”.

A spokesperson for the Treasury said:

Following an extensive review, we have withdrawn the cap on exit payments due to the unintended consequences it had on employees. We remain committed to bringing forward proposals at pace to tackle unjustified exit payments.