Payment Cap Scrapped

On 12th February 2021, the government revoked, with immediate effect, the Restriction of Public Sector Exit Payments Regulations 2020 and the supplementary HM Treasury Directions (which only came into force on 4th November 2020).

The government announced that the Regulations, which limited exit payment most public sector employees could receive in connection with loss of employment to a maximum of £95,000, may have “unintended consequences” and should, therefore, be withdrawn.

Since 2015, the government has been seeking reform to public sector exit payments to high earners to reduce costs to the taxpayer. However, trades unions opposed the Regulations on the basis that it would also affect long-serving employees on lower salaries, who were accessing their pensions early, as related payments would also form part of the £95,000 calculation.
New guidance that has been introduced for those who received a capped payment:

Therefore, affected employees should be proactively contacting their former employers directly to access the additional sums they may be due. Employers should prepare to be contacted by their former employees.

The revocation of the cap may also have affected public sector bodies’ plans for restructuring or redundancies in the future in light of payments no longer being capped.

Despite the restrictions being scrapped, the government has stressed it is still vital that exit payments from employers deliver value for the taxpayer and remains committed to reform. Employers should always consider whether exit payments are fair and proportionate.

Here to Help

If you would like further information and assistance on the exit payment cap, our Employment Solicitors Team would be happy to help. You can contact us on 0161 941 4000 or email The Employment Team for more information.