“Claw-back” of exit payments



Planned new regulations under section 154, Small Business Enterprise and Employment Act 2015, will require public sector employers to “claw back” exit payments made to anyone who leaves the public sector and then re-joins within 12 months if their salary on leaving exceeded £80,000.



They will be affected if they return to a job anywhere in the public sector within twelve months, regardless of whether the new role is on a lower salary.


The new regime will capture payments to the leaving employee or to any third party on their behalf, (such as a personal service company), including:


• redundancy pay;


• any pension top-up to enable early retirement; and


• any payment made as part of an agreed exit settlement between the employer and the employee.


Payments in lieu of notice and holiday pay will be excluded.


Working as a consultant will count as re-entry into the public sector for this purpose. Anyone who spends more than 50% of their time working for the public sector in a self-employed capacity, or as the employee of another person, will also be caught.


Up to 100% of the exit payment will be recovered by the old employer, or by the government if the old employer no longer exists. A tapering formula will be used to calculate the amount of the repayment, based on the number of days since leaving the public sector up to the maximum 12 months. If someone returns to work part-time, the recovery of the exit payment will be “pro rated”, taking into account the number of hours worked in the new role, compared with the former role.


As regards past service years, public services union UNISON says that Treasury guidance may encourage new employers to consider recognising lost service entitlement, but that this will not be automatic. This means that if the member is made redundant a second time, any future service-related entitlements will be dramatically reduced.


If someone cannot pay back their “exit” payment on re-joining the service, prospective employers are to be instructed to withdraw the job offer.


There is to be a “waiver” process whereby employers can ask the relevant government department for an individual exemption from recovery on a case-by-case basis. For example, whistleblowing settlements would be likely to be exempted.


Revised draft Repayment of Public Sector Exit Payments Regulations were expected to become law in April 2016, but they have been criticised as complex and hard to enforce. As Law at Work goes to press, it is not known when this change will become law, especially given the unexpected June 2017 election..