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Cap on exit payments will hinder councils and hamper recruitment – Solace

The £95,000 cap on public sector exit payments will hinder the transformation of local government, penalise councils and make younger staff redundant, the Society of Local Authority Chief Executive and Senior Managers (Solace) has warned.

It is “strongly opposed” to the new regulations outlined in the government’s consultation, as it believes the cap will create “unnecessary regulatory barriers” when combined with the cumulative impact of previous measures to “constrain the pay and pensions of senior staff”.

The consultation, which closes today, was published on 31 July seeking views on proposals to implement a £95,000 cap on the total value of exit payments made to workers when they leave public sector employment.

Answering the government’s consultation paper, Solace said new proposals could impact long-serving staff members on a salary of £39,000.

The measure would reduce the flexibility and mobility of the workforce, as well as stopping councils from being able to re-organise, thus slowing the transition to new ways of working.

The move would also exacerbate “existing difficulties” of filling senior positions, especially in councils facing significant recruitment challenges, and therefore likely be “discriminatory in terms of age”.

Graeme McDonald, director of Solace, who sits on PSE’s editorial board, said: “The government should be doing more to attract high-quality applicants from a broad range of sectors to senior roles within the public sector.

“The government has regularly agreed that professionals from the private and third sector would make a positive contribution to providing more effective and efficient public service and that we need to do more to build the capacity and capability of those leading on public institutions.

“However, these proposed regulations are a significant retrograde step in this endeavour. The disincentives to move from the private to the public sector will be too great.”

He added that the proposals would also discourage high-quality applicants from becoming middle or senior managers, and create “perverse incentives” that would drive new entrants and existing middle and senior managers towards agency roles, interim positions, and self-employment.

Other “age discriminatory” elements, such as limiting early retirement benefits, could lead to staff aged over 55 not leaving the job voluntarily, meaning staff under 55 would consequently be made compulsorily redundant.

McDonald added: “Given the scale of transformation and re-organisation that the sector is currently undertaking, this risks a displacement of younger employees resulting in an even older age profile for public sector employees. The overall impact in terms of service delivery, the quality of the pipeline for senior staff and the viability of pension schemes will be highly negative.”

Furthermore Solace has warned that should the government implement the cap, there would be a risk in increasing the overall cost of exits to the UK taxpayer due to a “significant increase in litigation and notice periods, gardening leave and protect employment disputes”.

They noted that the move would ultimately “undermine the independent accountability of local government” as it “fails to recognise the distinct openness and transparency of our local democratic system”.

It accused the proposal of being “badly targeted and unnecessary”, especially as the average cost of exit packages in local government costing less than in central government and public corporations.

Furthermore Solace slammed the government for giving a short amount of time for people to respond to the consultation, denouncing it for being at odds with their own ‘consultation principles guidance’ – the consequences of which would include narrow responses that cannot fully consider the impact of what is being suggested.

“This creates significant risk of discrimination or other adverse unintended consequences not being recognised, exposing the sector to legal challenge if implemented,” McDonald said.

The government wants to introduce the cap as a part of the Enterprise Bill, due to be published after summer recess.


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