Public sector exit payment reform: The impact on the NHS

Agenda for Change 2015 Redundancy Changes (England) The changes introduced in 2015 were: An earnings floor of £23,000 to be used to calculate payments for those earning less than £23,000   An earnings ceiling of £80,000 to be used to calculate payments for those earning more than £80,000 (maximum redundancy entitlement of £160,000) Removal of the employer top-up arrangements for those over 50. A minimum earnings floor of £23,000 - contractual redundancy payments for the lowest paid will be calculated using a minimum salary of £23,000, which will be pro rated for those working less than full time. A maximum earnings cap of £80,000 - even if an employee earns over this amount, their contractual redundancy payment is calculated using £80,000 as their salary.  The employer contribution for redundant staff aged over 50 was removed when the lump sum payment was not enough to pay for an unreduced pension (employees can use their redundancy money to pay towards topping up their pension contribution). Theses change have already helped to reduce redundancy costs across the NHS and have gone a long way already in meeting the governments aim of reducing the cost of redundancy in the NHS

Medical Contracts Currently those on medical contracts retain the pre-2015 redundancy arrangements (i.e. no cap or floor, employer top up remains for those over 50). Those moving onto the new 2016 junior doctors’ contract will be covered by the revised 2015 redundancy arrangements for England as set out in the NHS Staff Council handbook. Moving forward all those on the medical contracts will have to comply with the new arrangements for public sector exit payments (including redundancy arrangements). The BMA refused to sign up to the negotiated changes to redundancy arrangements for England in 2015 and therefore the 2015 changes were not incorporated into their contracts. The new 2016 Junior Doctors contract directly links to the NHS terms and conditions of service handbook (AfC) for the purposes of any redundancy for a Junior Doctor. If the BMA refuse to engage in negotiations this time around, the legislative route could result in a worse position to that of those on AfC redundancy terms.

Public Sector Exit Payment Reform (Part 1) In 2015 the government made some initial proposals to limit public sector exit payments: introducing a cap on all public sector exit payments of £95,000 (down from the current £160,000 maximum) clawback of redundancy compensation for those earning over £80,000 when they return to the public sector within 12 months of receiving an exit payment (currently clawback applies for Trust VSMs via the NHS Standard Contract).  Currently we are awaiting the laying of regulations before this takes legal effect (possibly in early 2017). These arrangements have already been agreed and we are awaiting changes to regulations to bring this into effect (likely sometime at the end of this year/early next year). Clawback repayments Clawback applies to those returning to any part of public sector Includes redundancy and severance payments but not PILONs or accrued annual leave payments Tapered recovery of payment from date of exit up to 12 months for those who return to the public sector Exit payee must inform new employer as soon as is reasonably practicable and before returning to public sector Duty triggered not just by new employment but also if return is off-payroll / on self-employed basis Things to consider: Record of exit payment to be maintained by old employer in written or electronic form Payee, amount, type, date, age, length of service, remuneration in last 12 months, NI contributions, standard weekly hours Capable of being retrieved upon request for 3 years https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/487519/Draft_Repayment_of_Public_Sector_Exit_Payments_Regulations_for_publication_17_12_15.pdf

Public Sector Exit Payment Reform (Part 2) Further reform proposals were announced by the government in September 2016. Additional proposals which will impact on the NHS: a maximum tariff for calculating exit payments of three weeks’ pay per year of service a ceiling of 15 months on the maximum number of months’ salary that can be paid as a redundancy payment a taper on the amount of lump sum compensation an individual is entitled to receive as they get closer to their normal pension age.  The Government consulted on further reforms to public sector redundancy/exit payments early 2016. Response to consultation published on 26 September confirmed policy to press ahead with changes. Some of the government’s proposals have already been delivered by the NHS (see previous slides). The proposals listed above are additional changes the NHS will be expected to make to terms and conditions.

Next Steps The Department of Health will give NHS Employers a remit to negotiate the additional changes to terms and conditions for NHS terms and conditions, to be delivered within 9 months (by the end of June 2017). If the NHS trade unions are unwilling to engage in a negotiated change then the government will move to use primary legislation to enact the changes. DH are exploring with HMT as to what degree of flexibility there is around the 3 week and 15 month maximums, based on the fact that the 2015 NHS redundancy changes have already delivered savings ahead of these changes. Without flexibility on these maxima it is unlikely that a negotiated agreement will be reached. Any negotiated changes would have to be agreed through NHS Staff Council negotiating processes. Employers have representatives (http://www.nhsemployers.org/your-workforce/pay-and-reward/national-negotiations/nhs-staff-council) from their regional HRD networks sitting on the NHS Staff Council. Government say that failure to reach negotiated change could result in using a legislative route to secure changes.