Which payments are covered by the public-sector exit pay cap?

From 4 November 2020, an exit payment made to an employee in the public sector must not total more than £95,000.

The cap will apply to most payments made on termination of employment, including:

• redundancy pay (including voluntary redundancy);
• payments made to prevent reduction of a pension on early retirement (including payments made to the scheme);
• payments made under a settlement or conciliation agreement and compensation awarded under the Acas arbitration scheme (although the cap will be waived for payments to settle whistleblowing, discrimination and health and safety dismissal/detriment complaints);
• severance payments and ex gratia payments;
• shares or share options;
• contractual payments in lieu of notice (except where the payment does not exceed a quarter of the employee's salary);
• compensation for the termination of a fixed-term contract; and
• any other payment, contractual or otherwise, in consequence of termination of employment or loss of office.

The cap does not cover payments that are made:

• in respect of death in service;
• in respect of incapacity as a result of accident, injury or illness;
• in respect of accrued annual leave;
• in compliance with an order of any court or tribunal;
• in lieu of notice under the contract that do not exceed a quarter of the employee's salary;
• under certain provisions of the Firefighters Pension Scheme; or
• in certain circumstances, as a service award to a member of the judiciary.

Where an individual has more than one exit from public-sector employment within 28 days, the cap applies to the total payments made in respect of those exits.