Teacher severance pay cap will cost schools, warns union

Schools are facing the prospect of more costly employment tribunals after the government announced it was clamping down on generous exit packages, a union leader has claimed.

The Treasury has confirmed today it will be enacting a £95,000 cap on severance payments following a consultation that proposed to end six figure exit pay-outs for public sector workers, including teachers and civil servants.

The government will also introduce a ceiling on the number of months’ salary that can be paid as redundancy payment and a taper on the amount of lump sum compensation a worker is entitled to as they near retirement age.

Schools Week has previously revealed exit packages to departing staff increased by £13 million last year.

A total of £50 million was handed out during 2014-2015, compared to £37 million the previous year, Department for Education (DfE) accounts revealed.

The majority of these payments were to staff from academies and free schools, but fell way below the government’s new cap.

It appears the new limit will hit civil servants hardest, with accounts revealing the highest pay-off last year was to a departing staff member from one of the DfE’s agencies. The person was not named.

But Russell Hobby, general secretary of the NAHT, said fewer teachers would now opt for voluntary redundancy – thereby increasing costs through compulsory redundancy payments and possibly more employment tribunals to schools and academy trusts.

“The government’s claim that the changes will save money is also questionable. With lower payments, fewer people will apply for voluntary redundancies, thereby leading to more compulsory redundancies, which are costlier.”

He added that the additional decision to cap redundancy payments at fifteen months’ salary did nothing to reward experienced headteachers with lengthy service, nor encourage them to take on schools with difficult track records where they might lose their position.

“Plans to cap redundancy payments at fifteen months salary will also be counterproductive. This cap will see more people resort to employment tribunals, increasing costs. And at a time when we need to keep school leaders in the profession, is it right to put in place a cap than penalises those who remain in the profession for many years?”

He said the changes act as a “further deterrent to leaders to take on the most challenging schools”.

“In a high stakes system, the government has two choices: to ensure the right incentives are in place so people take on career risks, or address the high stakes accountability system itself. Unfortunately the government has chosen to do neither.”

Schools Week has revealed how school staff across the country are facing redundancies as schools and trusts balance squeezed budgets.

We also revealed that the government granted academies nearly £8 million so they can dismiss staff as part of a “rapid drive for improvement”.

But the treasury said the new framework will ensure a “fair and appropriate level of compensation is provided for employees who are required to leave public sector jobs”.

David Gauke, chief secretary to the Treasury, added: “These reforms ensure public sector exit payments are consistent and fair, and that they are also fair to taxpayers too. By applying these reforms across public sector workforces for the first time, appropriate standards will be in place for workers and public services will remain protected.”

Exit packages are offered when an employee leaves employment, either through resigning, being made redundant or being sacked.