On 28 October 2014 the Government produced its report on the outcome of consultation into the recovery of public sector exit payments.
The Government’s proposal was to enable the recovery of exit payments when high earners returned to the same part of the public sector within 12 months of leaving. This was in response to a number of high profile cases, including an Audit Commission report in 2010 finding that of 37 Chief Executives who left by mutual agreement over a two year period from January 2007, six had been employed in another council within 12 months.
As a result of the consultation, the Government has decided to continue with the main elements of its policy requiring high earning public sector employees or office holders to repay (on a pro rata basis) a broad definition of exit payments should they return to the same part of the public sector within 12 months.
High earners are defined as any individual earning above £100,000.
Following the responses received to consultation, the Government has made some changes to its original proposal:
The Government will now draft Regulations giving effect to the policy no later than April 2016.
It is interesting to note that within two days of this announcement by the Government, public sector exit payments again hit the headlines in a different context.
Bryn Parry-Jones was the Chief Executive of Pembrokeshire Council. Following an investigation into cash payments in lieu of pension contributions which the Wales Audit Office judged as unlawful, on 16 October 2014 councillors voted (29 to 23) in favour of a settlement agreement under which Mr Parry-Jones would receive £330,000.
However, the Council’s appointed auditor served an advisory notice on the Council to block the deal, claiming that £52,760 of it was unlawful expenditure. When it was agreed by the Council to exclude those payments, the auditors lifted the order banning the payment.
The Council’s Labour group leader, Paul Miller, then applied for a High Court injunction against the payment of approximately £280,000 demanding that the changed deal be voted on at a full Council meeting. This urgent bid for a last-minute injunction failed. Nevertheless, this case is a useful reminder of the need for settlement agreements entered into with senior public sector staff (particularly within the context of potential disciplinary investigations) to follow the correct approval and audit procedures, failing which legal challenges might be made.
David Potter
Partner
0845 274 6819
david.potter@freeths.co.uk
Matt McBride
Partner
0845 274 6949
matthew.mcbride@freeths.co.uk