SEVERANCE, EARLY RETIREMENT AND REDUNDANCY TERMS
Contents:
Scope
Key Points
Background
Voluntary Resignation
Approved Schemes Provided by Sponsored Bodies
Annex: Employment Act 2002
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. Scottish Executive Departments, Executive Agencies and associated Departments) and bodies sponsored by the Scottish Executive. However, it is equally relevant to all other organisations subject to the requirements of the Scottish Public Finance Manual (SPFM).
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. Compensation is not normally payable when someone resigns voluntarily outwith any approved scheme. Proposals for compensation payments outwith any approved scheme must be referred to the relevant departmental Finance Team for approval before any offer is made, whether orally or in writing .
4. As a general rule compensation schemes provided by sponsored bodies should be by analogy with the arrangements operated by the Scottish Executive.
5. A sponsored body must obtain prior approval from its sponsor Department for any severance, early retirement or redundancy scheme.
Background
6. In considering terms for severance, early retirement or redundancy packages - whether compulsory or voluntary - public bodies to which the SPFM is applicable should ensure that issues of regularity, propriety and value for money are fully taken into account. These include the following specific requirements:
- public funds must not be used wastefully or to underwrite inequitable or over-generous conditions of service;
- 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;
- offers of subsequent employment or consultancy work should be exceptional and only made where they represent the best 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 approved scheme. Exceptionally, circumstances may arise where it is highly desirable that an individual should leave, but where the individual concerned would not satisfy the criteria for compensation under an existing approved scheme. However, in such circumstances any proposal to offer a financial consideration to secure the early voluntary resignation of the individual concerned should be regarded as contentious. Such proposals by constituent parts of the Scottish Administration or bodies sponsored by the Scottish Executive must therefore be referred to the relevant departmental Finance Team for approval before any offer is made, whether orally or in writing.
8. The case presented to the departmental Finance Team should include;
- an explanation of the circumstances of the case, including any scope for reference to a tribunal, with its potential consequences, including the legal assessment of the organisation's chances of winning or losing the case;
- confirmation that the relevant management procedures have been followed;
- an assessment of the value for money offered by the possible settlement;
- any non-financial considerations, eg where it is desirable to end a person's employment but dismissal is not warranted; and
- an assessment of whether the case in question could have wider impact, eg for a group of potential tribunal cases;
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.
Approved Schemes Provided by Sponsored Bodies
10. As a general rule compensation schemes provided by sponsored bodies should be by analogy with the arrangements operated by the Scottish Executive. (Guidance on the Scottish Executive's severance, early retirement and redundancy terms is provided in the section of the Staff Handbook on "Other Provisions and Conditions of Service".) A sponsored body must obtain prior approval from its sponsor Department for any severance, early retirement or redundancy scheme. The sponsor Department's consideration of such schemes should include consulting with its departmental Finance Team, Finance Pay Policy, Public Bodies Unit and Audit Services. The sponsor Department should also consult the Scottish Public Pensions Agency where considered necessary. (Specific guidance for sponsoring divisions on this and other matters can be found on the Scottish Executive's Public Body Sponsorship Guidance.)
Employment Act 2002
11. Nothing in this guidance overrides the requirements of the Employment Act 2002, on which more information is given in the Annex. In particular public bodies should have robust and transparent personnel policies. This is important because the Act protects employers which operate clear rules so that irrelevant mistakes do not of themselves provide grounds for challenge. While the Act 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.
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Page Published/ Updated: January 2006