Substantial reforms to the Civil Service Compensation Scheme (CSCS) will save up to £500 million over the next three years without impacting on the very lowest-paid civil servants.
The scheme sets out how much compensation should be given to staff who are made redundant or who volunteer to leave under an early exit programme.
Under the new rules announced today by Minister for the Cabinet Office, Tessa Jowell, a new maximum severance payment limit will be imposed for all Civil Servants, all departments will be required to follow the same rules on redundancy payments (with some flexibility to set compensation payable in other circumstances) and the minimum qualifying period for redundancy payments will be increased.
Tessa Jowell said the reforms, which will come into effect from 1 April 2010, represented a fair package:
"The existing compensation scheme has been in place since 1987 and isn't appropriate for the modern Civil Service. Today's changes will help ensure the Civil Service delivers the £500 million efficiency savings that the Prime Minister announced earlier this year, while protecting the lowest-paid civil servants. The changes will also bring the scheme in line with age discrimination reforms and similar offers across the public sector."
The Cabinet Office published its original plan for reforming the CSCS in July. Following consultation, several amendments have been made to the proposals, including providing extra protection for the lowest-paid civil servants.
Key features of the reforms:
* Anyone made compulsorily redundant will receive cash compensation of up to two years' pay. For the lowest paid, cash payments will be capped at three years' pay or £50,000, whichever is lower. This protects the 60 per cent of civil servants that earn less than £25,000 a year.
* Anyone who receives a severance payment and then returns to work for the Civil Service will have to pay back their cash settlement on a pro-rata basis. In the future, the Civil Service will explore the feasibility of extending this policy to include anyone to returns to work as a consultant for the Civil Service.
* The minimum qualifying period for a redundancy payment will be increased from one to two years.
The new compensation scheme will have no effect on existing civil service pension schemes.
The changes announced today to the Civil Service Compensation Scheme are the outcome of a consultation process that began in July, and are part of the ongoing modernisation of the Civil Service. On Monday, the Government will publish, Putting the Frontline First: Smarter Government, which will set out a wider range of policies to improve public services.
Notes to editors
1. On 31 March 2009 the Prime Minister announced his commitment to cut the cost of the Civil Service.
2. On 31 July 2009, the Cabinet Office published the original proposals for reform of the Civil Service Compensation Scheme in the document, Fairness for All. The proposal document was issued to the Civil Service trades unions and to other interested parties and was also made available through the Civil Service website. Comments were invited on the proposals, to be submitted to the Cabinet Office by 5 October 2009.
3. The Civil Service will continue to regard compulsory redundancy as a last resort, to be used only where redeployment is not feasible.
4. Full details of the reforms can be found at: www.civilservice.gov.uk/my-civil-service/pensions
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