Case study

How GAD assisted the government with the redundancy ready-reckoner

Modelling the impact of the £95,000 pay-out cap.

Man being given a redundancy letter

We assisted the government in its consultation on a proposal to introduce a £95,000 cap on the total value of exit payments for civil servants and other public sector employees.

The government introduced powers to cap these payments in the public sector at £95,000 in the Small Business, Enterprise and Employment Act 2015. Between 2011 to 2014 the cost of public sector exit payments was around £6.5 billion. More than £1 billion of this came from redundancy payments of more than £100,000.

Government departments reviewed their own redundancy terms in the light of these proposals which were first set out in 2015. GAD’s expertise and familiarity with government and the complexities of working in the public sector meant we helped our clients to understand the impact of changes in their redundancy terms.

Man cleaing out desk

GAD used a combination of scheme data and departmental accounting data to assess the impact of the proposals and perform scenario testing to consider the impact of a range of different changes. We assessed the cost of adding salary floors on each component of the benefit, and the cost saving from:

  • capping overall benefits at £95,000
  • adding salary caps on each component of the benefit
  • limiting the age at which enhanced pension benefits can be taken

HM Treasury launched a consultation in April 2019 setting out the proposed method of implementing the £95,000 cap, including which bodies should be in scope. We continue to work with government departments in reaction to this latest consultation.

Published 24 June 2019