Civil service pay-offs: coalition changes
Updated on 05 July 2010
The government plans to reform the civil service compensation scheme, but what are the options they have? Channel 4 News talks to employment lawyers to find out.
Last month trade unionists struck a blow to the government's cost cutting plans with a successful legal challenge against the previous administration's proposals to cut civil servants' perks.
The proposals would have seen civil servants' compensation for redundancy and early retirement capped in a bid to save £500mn.
But the successful legal challenge has not deterred the incoming government from reviving the proposals, with plans amend the civil service compensation scheme (CSCS) set out in the coalition agreement.
What is the current position for civil servants?
The payment currently depends on a civil servant's age and length of service. It can increase by up to three months' pay for every year of service to a maximum of three years of pay.
For someone aged 41 who earns £24,000 and has 20 years service, their current entitlement if made compulsorily redundant would be £72,000.
However the longest serving staff members who are over the age of 50 can receive up to six years of earnings as a farewell payment.
What would the changes mean?
If the government's scheme is based on the one proposed by Labour, it would cap any payments at two years pay. However, the coalition government has made no announcement about what form their proposals will take.
Taking Labour's scheme as an example, in a compulsory redundancy situation all the existing terms will disappear. They will be replaced by cash only payments of a month's pay for each year of service, doubled after five years service, subject to cap of two years pay.
The Public and Commercial Services (PCS) union said its members' entitlement to redundancy pay would have been slashed by a year's pay or more under the proposals with no access to enhanced and early payment of pensions to those over 50.
Under the changes proposed by the last government, our 41-year-old civil servant's farewell payment would be capped at £60,000.
Government faces anger over plans to cut compensation packages to civil servants
"The reality about pay is the civil service is up to 7 per cent behind comparable jobs in the public sector and even more in the private sector.”
Mark Serwotka, PCS general secretary, Radio 4 Today, 5 July 2010
In the age of austerity, the gloves are coming off. After weekend reports that government departments were being asked to draw up worst-case plans for 40 per cent cuts, today the government announced plans to crack down on civil servants’ redundancy packages.
This prompted outrage from the biggest civil service union, which said industrial action would be an “inevitability” if pay-offs were slashed. In these straitened times, some might think that smacks of 70s-style union militancy. But Mark Serwotka, general secretary of the PCS, said that civil service pay levels were lagging behind not just those of private companies, but also other state employees. So how tight are Whitehall pay cheques?
Read more: FactCheck's analysis
Who would the changes have affected?
Anyone whose employer is in the principal civil service pension scheme (PCSPS) is covered by the CSCS and is made redundant in the future.
The government's options:
According to Tom Flanagan, an employment law partner from Pinsent Masons, the government has two options. The first is to reopen negotiations with the unions in order to strike an acceptable agreement.
The second option would involve replacing a piece of legislation dating back to the 1970s which was successfully used by trade unionists to challenge the government's proposals.
The government had tried to get the changes through using secondary legislation, but unions used the Superannuation Act of 1972 to quash the revised scheme which the government had sought to impose from 1 April 2010.
By introducing primary legislation, the government would remove the basis for the Public and Public and Commercial Services union’s challenge.
The government's position:
A Cabinet Office spokesman reaffirmed the government's commitment to the changes: "As outlined in the coalition agreement, we are looking at ways to reform the CSCS to bring it more into line with good practice in the private sector."
The spokesman played down claims that the government would resort to legislation, but did not rule it out. "As in any process like this, our intention would always be to seek to reach a negotiated agreement, which would include protection for lower paid civil servants. We will make an announcement to parliament in due course."
What are the unions' positions?
There are six unions that cover the civil service. Five of the six agreed to the previous government's proposals in negotiations, but the government failed to agree terms with the PCS.
The PCS says that the benefits from the scheme are accrued entitlements that it believes the government has no right to remove. As it is a statutory scheme changes have to be agreed by parliament.
The government then introduced without the PCS's agreement a scheme which cut members' accrued rights under the CSCS. This was challenged by the union in the high court, which ruled that the government had acted unlawfully on 10 May.
This means that the new government will have to reopen negotiations with the unions to change the agreement.
The First Division Association, one of the unions which represents agreed to the proposals set out by Labour, says its position has not changed. FDA General Secretary Jonathan Baume, said: "Given that the government is not going to let the current terms stand as they are, any changes will have to be done through negotiation."
PCS general secretary, Mark Serwotka, said: "The High Court ruled twice in our favour that it was unlawful for the government to cut civil service redundancy pay without the consent of its workforce.
"It is a disgrace that, simply because it failed to get its way, the government now appears to be prepared to change the law to make it easier and cheaper to sack tens of thousands of civil and public servants.
"Following the high court decision, we immediately said we were open to negotiations to seek to reach an agreement. So it is shocking that the government does not seem willing to even test whether this is possible."
The best option for the government:
Tom Flanagan says that the introduction of primary legislation is a heavy handed tactic but "perfectly legitimate".
He said that with cross-party agreement on the need to reduce civil service these golden farewells it would be relatively straightforward to get the necessary legislation through parliament.
"The safe route is to do exactly what Labour were doing but remove the statutory protection through primary legislation," said Mr Flanagan.
Stephen Levinson, employment law partner at Radcliffes Le Brasseur, said: "Unless you can persuade the unions to agree they are going to have to get primary legislation."
But the government might not be able to make all the savings they hope for if civil servants take matters into their own hands. "The interesting thing is whether we will get a rush of civil servants trying to retire before it becomes law," Mr Levinson added.