Is the £95,000 cap on exit payments in the public sector in force?
The £95,000 cap on exit payments in the public sector came into force on 4 November 2020. However, on 12 February 2021, the Government announced that the cap is being removed with immediate effect, recognising that it may have had "unintended consequences".
HM Treasury Directions published on 12 February 2021 disapplied the relevant parts of the Restriction of Public Sector Exit Payments Regulations 2020 (SI 2020/1122), which introduced the cap. The Regulations are revoked from 19 March 2021.
The Government published guidance for individuals and employers that have been affected by the cap and its revocation. The guidance states that: "Employers are encouraged to pay to any former employees to whom the cap was applied the additional sums that would have [been] paid but for the cap."
However, the Restriction of Public Sector Exit Payments (Revocation) Regulations 2021 (SI 2021/197), which revoke the cap, expressly require employers to pay affected employees the additional sum, with interest.
The Government had previously published guidance on the operation of the Regulations, including on when the power to waive the cap could be exercised.
The schedule to the Regulations sets out which public-sector organisations were covered by the cap. These included local government, including fire authorities and maintained schools; the NHS; police forces; the civil service, its executive agencies, non-ministerial departments and non-departmental public bodies; and academy schools.
A separate £95,000 cap is in force in Scotland for exit payments made by devolved bodies.