6.3 CSCS, early departure and ill health

6.3.1 The CSCS allows you to pay compensation to members who leave on early departure terms. It is a statutory scheme and gives you authority as an employer to compensate members for losing their job.

6.3.2 CSCS benefits are also payable to optants out of classic, classic plus, premium, nuvos and alpha and those with a partnership pension account.

6.3.3 Blank

6.3.4 Service transferred in from a ‘By analogy’ scheme (i.e. a scheme that has the same rules as the CSP arrangements) can only count towards the member’s CSCS benefits if Scheme Manager approval is given.

6.3.5 There are three categories of early departure. Before you can launch any scheme you will need approval from the Scheme Manager, Cabinet Office. You will need to complete the relevant application forms and send to:

redundancyschemes@cabinetoffice.gov.uk

6.3.6 The categories are:

Voluntary Exit (VE)

This can be offered in the interests of workforce efficiency and where employers wish to reduce staff numbers, to support organisational changes, address promotion blockages and where there is limited efficiency. There is no compulsion on individuals to accept the offer; it is an agreement between the employer and employee.
There is a standard tariff of one month’s pay per year of service up to a maximum of 21 months’ pay for those under scheme pension age. Employers may offer more or less than the standard tariff subject to limits. To offer more than standard tariff, employers must have Scheme Manager approval.
Tapering of compensation will apply where the member is close to the scheme pension age. For members who moved into alpha from one of the PCSPS schemes on or after 1 April 2015, the compensation is tapered in relation to their Normal Pension Age (NPA) in alpha

For those over scheme pension age there is a maximum of six months' pay. For members who have moved into alpha from one of the PCSPS schemes, it is the alpha NPA which applies.

Voluntary Redundancy (VR)

This can be used in a variety of situations where the employer has identified business changes which may result in redundancies:

• The work may be changing or reducing
• The work will be done in a different way
• The work will be stopping, or
• The location of the work is changing/the office is closing.

A Voluntary Redundancy (VR) scheme must be offered before Compulsory Redundancy (CR) and the employer must have begun formal consultation with the Unions about possible redundancies before a scheme is launched. The VR scheme should cover at least all staff selected for redundancy, but if the scheme is run before selection is complete it may cover all those who are at risk (i.e. all those in the unit of redundancy, also known as the redundancy pool).
There is no compulsion on staff to apply for VR at this stage, but they must be aware they could be made compulsorily redundant at a later stage of the same scheme and receive CR terms. However, if an employee applies for VR but does not meet their employer’s criteria for release (or was never offered VR) they cannot be subject to the CR terms at a later stage of that redundancy exercise. Staff in this position will be entitled to the VR terms.

Employers must offer the standard tariff of one month’s pay per year of service up to a maximum of 21 months’ pay for those under scheme pension age.

Tapering of compensation will apply where the member is close to the scheme pension age. For members who have moved into alpha from one of the PCSPS schemes on or after 1 April 2015, the compensation is tapered in relation to their NPA in alpha.

For those over scheme pension age, there is a maximum of 6 months' pay. For members who have moved into alpha from one of the PCSPS schemes, it is the alpha NPA which applies.

Compulsory Redundancy (CR)

This is used in the same situations as Voluntary Redundancy (VR). However, individuals should first be offered VR, making it clear that they are at risk of CR, before employers move to a compulsory scheme. The CR scheme cannot cover anyone beyond the staff who were (or should have been) included in the preceding VR scheme.

Any member of staff who was turned down for VR (or was never offered VR) and is later made compulsorily redundant under the scheme linked to that VR scheme, will receive VR terms. This protection does not extend to anyone who did not apply for VR or refused an offer of VR linked to the CR scheme.

There is a standard tariff of one month’s pay per year of service up to a maximum of 12 months’ pay for those under scheme pension age.

Tapering of compensation will apply where the member is close to the scheme pension age. For members who have moved into alpha from one of the PCSPS schemes on or after 1 April 2015, the compensation is tapered in relation to their NPA in alpha.

For those over scheme pension age, there is a maximum of six months' pay. For members who have moved into alpha from one of the PCSPS schemes, it is the alpha NPA which applies.

Please note: Annex 6F contains further detailed information about VE, VR and CR. This includes further information on the tariffs, employer’s discretion, Scheme Manager approval, member’s options and other important information.

6.3.7 You can grant members of any age Ill Health Retirement if the Scheme Medical Adviser believes their breakdown in health is likely to be permanent and prevent them from carrying out their work. The document ‘Ill Health Retirement - procedural Guidance for Employers’ (which is in Annex 6J), provides further information. Under alpha, nuvos, premium and classic plus there are two tiers of benefits payable depending upon whether the member cannot do their own job or cannot work again in any capacity.

If the member has already partially retired they can only qualify for a lower tier ill-health pension (even if they meet the upper tier criteria).

Please note: if a member is due to be moved into alpha while they are in the process of an IHR application (or an appeal against a decision to turn down their application) you must not move the member until you are aware of the final decision. They must have exhausted all their options to appeal.

Where it is clear that an employee has health problems that are affecting their capability for work, employers should always consider IHR. You should not try to influence an employee’s decision or give any kind of assurances about their eligibility for IHR.

Where the member does not meet the IHR criteria, or IHR is not appropriate, you may consider dismissing them on the grounds of efficiency (see ‘Dismissal on grounds of efficiency’ (6.2.18 to 6.2.25) for further information).

The following paragraphs tell you the steps to take to guard against the possibility of overpaying CSCS benefits to a member who has appealed against your decision not to give them IHR.

Retrospective Ill Health Retirement (RIHR)

6.3.8 Where someone is leaving voluntarily (e.g. resigning, retiring or leaving under voluntary exit terms (including voluntary redundancy)) they are choosing those exit terms rather than leaving on IHR. Therefore any IHR application will come to an end when the individual leaves. That would include any IHR application at the appeal stage. It is therefore very important that you as the employer make this very clear to any employee who is considering leaving under voluntary terms who also has (or might be eligible for) an application for IHR.

However, where a person is dismissed or made compulsorily redundant, as long as an IHR application has been submitted before their last day of service, the application can continue to its conclusion (again that would include the appeal process). It should be explained to the member that should the IHR terms be granted, any leaving package paid to the member would be replaced by the IHR benefits. Therefore, any amount already paid, would need to be recovered from those benefits.

To avoid an overpayment scenario, you should only pay part of any CSCS lump sum equal to the lump sum that they would receive on IHR. Before doing so, you should obtain a written acknowledgement from the member. Paragraph 6.3.11 refers. Tell the Scheme Administrator that the member has an IHR appeal outstanding.

RIHR can apply when a former employee asks their former employer to consider them for Ill Health Retirement after they have left employment. RIHR is not a provision in the Civil Service Pension scheme rules. This means that former employees have no statutory right to RIHR. 

All RIHR applications need agreement from the Scheme Manager (Cabinet Office) before processing. The Scheme Medical Adviser (SMA) will not accept applications for RIHR without evidence of Scheme Manager agreement. For more information see the ‘Applying for RIHR’ section.

This guidance is for further clarification and does not replace EPN 340.

Criteria for RIHR applications

6.3.9 Should the appeal fail, you can pay the balance of the CSCS lump sum. You will not have to pay interest as this is a discretionary payment.

The Scheme Manager will only agree to RIHR applications in exceptional circumstances. For example, where there has been a mistake or omission in handling the former employee’s exit. That is usually where an employer has dismissed an employee, or they resigned for reasons connected with health, but:

• the employer failed to consider IHR for an individual when it is clear that they should have; and/or
• the employee was not made aware of their right to apply for IHR.

Other types of exit alongside IHR and RIHR

6.3.10 If the member’s appeal succeeds, write to the Scheme Manager for approval to set off the CSCS benefits against their IHR benefits. Include a copy of the member’s acknowledgement of the debt.

Voluntary Exits

Where someone is leaving voluntarily, for example:

• Resigning
• Retiring, or;
• leaving under voluntary exit/redundancy terms

It is important that employers make it absolutely clear to employees that if they choose to leave on one of these voluntary exit terms instead of IHR if they are eligible, any on-going IHR application, including those already at the appeal stage, will cease when the individual exits. If an employer suggests to an employee before they exit that RIHR would be an option for them later, they would be mishandling their exit.

Dismissal or compulsory redundancy

6.3.11 Suggested form of acknowledgement:

I, [member’s name], hereby acknowledge that, should I be granted Ill Health Retirement, I will owe [name of department/organisation] £[amount] which is equal to the sum of Civil Service Compensation Scheme benefits I have/will have received in respect of the termination of my employment.

Signed [member’s signature] Date [date of signing]

If an application for IHR was made before an employee’s last day of service, that application should continue to its conclusion. This includes those already at the appeal stage. Under these circumstances, IHR applications that are completed after the last day of service should not be treated as RIHR.

Employers should explain to employees that if the IHR application is successful, any leaving package they have already been quoted would be replaced by the IHR benefits and any exit compensation that has already been paid, would need to be paid back by the employee.

More information, including suggested wording employers can use to record employees acknowledgement and agreement to return the compensation owed, can be found in the ‘Paying CSCS benefits while an appeal against refusal to grant Ill Health Retirement is in progress’ section of Employer’s Pension Guide section 6.

Applying for RIHR

6.3.12 In addition to the information stated in table 1, the Scheme Administrator will also give members information on:

• their pension, including taking it early;
• buying added pension;
• the effects of re-employment with an employer who participates in the CSP arrangements;
• benefit payment procedures and voluntary deductions from pensions;
• taxation of pension benefits;
• the allocation arrangements (classic members who are not being medically retired only).

The information provided will be tailored to the individual circumstances.

Employers must apply to the Scheme Manager on behalf of a former employee. Former employees must not contact the scheme manager or the SMA directly.

Employers should put the application in writing to:

cspsemployerenquiries@cabinetoffice.gov.uk

You must set out the reason the former employee believes they are eligible for RIHR and provide the following details on their exit:

• sequence of events (with dates) leading up to their exit
• details of sick absence(s);
• copies of any relevant Occupational Health Adviser (OHA) reports;
• records of any capability hearings or discussions;
• copy of the dismissal letter, if applicable; and
• any other relevant correspondence or emails records of conversations between the employer and former employee advising them of their options on leaving. 

If you have questions about whether RIHR might apply, email cspsemployerenquiries@cabinetoffice.gov.uk

The Scheme Manager will assess the evidence to decide whether an employer has managed the former employee’s exit correctly.

If the Scheme Manager agrees, the employer should apply to the SMA in the normal way.

Details to include:

• in the application to the SMA, clearly state that it is an RIHR application
• in the referral for the Scheme Administrator (MyCSP) and the SMA, include evidence of the Scheme Manager’s approval (usually the email reply to the employer’s request). The application cannot proceed without it.

At this stage, employers should explain to the former employee that the SMA’s assessment will determine whether they met the IHR criteria at the time they left service, not the time of application for RIHR - even if their health has since deteriorated.

Table 1 below gives guidance on the actions that need to be taken when carrying out an Exit Scheme. There is a ready reckoner at Annex 6G which shows the estimated costs of Voluntary Exit, Voluntary Redundancy and Compulsory Redundancy, both the compensation lump sum and the cost of buying out the reduction for earlier payment.

6.3.13 The Scheme Administrator will also confirm with the member their current death benefit nomination.

6.3.16 If you propose to terminate a fixed term contract early for redundancy, you must first make an offer to that employee for a departure using Voluntary Redundancy terms (and give three months’ notice). You will not require Scheme Manager approval or need to follow Scheme Manager Protocol. You should notify the Scheme Administrator in the normal way asking for Voluntary Redundancy terms and giving a Scheme Reference number of VR (name of employer e.g. MOD) FTAM (VR MOD FTAM). Where such offer is not accepted, you can go straight to Compulsory Redundancy without seeking Scheme Manager approval. You should notify the Scheme Administrator in the normal way giving a scheme reference number CR (name of employer) FTAM (CR MOD FTAM).

6.3.17 Where such an offer is not accepted, you can go straight to Compulsory Redundancy without seeking Scheme Manager approval. You should notify the Scheme Administrator in the normal way giving a scheme reference number CR (name of employer) FTAM (CR MOD FTAM). If the individual’s contract stipulates a notice period for early termination, they will receive the same Compulsory Redundancy terms under the CSCS arrangements as a permanent employee, with the appropriate notice period stipulated in the contract.

6.3.18 If the employee’s contract does not stipulate a notice period for early termination they should receive the better of the Compulsory Redundancy terms under section 12 of the CSCS or section 8 of the CSCS (the compensation payment under section 8 will be calculated by Government Actuary’s Department (GAD)).

6.3.19 If an employer wishes, those on a fixed term appointment can be considered for early departure under a departmental wide Voluntary Exit or Voluntary Redundancy scheme. If accepted they must be treated the same as permanent members and the normal terms will apply. Approval from the Scheme Manager will be required for the scheme. If approved, the scheme will be given a scheme reference number. This number should be used for permanent and fixed terms employees when requesting quotes from the Scheme Administrator.

Please note: Any notice periods for early termination of fixed term contracts will not have the effect of extending the period of the contract.

6.3.20 A person who has suffered an injury that qualifies under the Civil Service Injury Benefit Scheme who then leaves on Voluntary Exit, Voluntary Redundancy or Compulsory Redundancy is entitled to ask for Injury Benefit.

This applies to those who leave before their pension age and those leaving at or after their pension age. The usual process for determining Injury Benefit entitlement applies. Employers need to ask the Scheme Administrator to ask the Scheme Medical Adviser to assess the extent to which the person’s injury has impaired their earning capacity and whether apportionment is appropriate.

If you have any questions about TUPE and the CSCS, please email cspsemployerenquiries@cabinetoffice.gov.uk with “CSCS and TUPE” in the title.

6.3.21 Under review

6.3.22 Under review

6.3.23 Under review

6.3.24 Under review

6.3.25 Under review

6.3.26 Under review

6.3.27 Under review

6.3.28 Under review

6.3.29 Under review

6.3.30 Under review

6.3.31 Rejoining the CSP arrangements may affect a member in a number of ways if they had previously left with an award. Your recruitment process must identify individuals who are receiving or have received their benefits from an employment covered by the CSP arrangements before they are appointed. You should do this by using the Pensions Questionnaire and Joiner Tool (available on the Employer section of the website – see ‘Your responsibilities when staff join’ (section 4) for further information).

Appointment Terminates at the End of a Fixed Term Contract

6.3.14 A fixed term employee whose contract is terminated on the expiry date on the grounds of redundancy may be entitled to compensation under the scheme. The expiry of a fixed term appointment is not automatically a dismissal on the grounds of redundancy and you should consider taking legal advice on this point. Where the termination is on the grounds of redundancy, Scheme Manager approval for making a payment is not required. You are also not required to follow the procedures set out in the Cabinet Office Protocol for handling surplus staff situations (2016 Protocol – Civil Service Redundancy Principles). In addition, the requirement to offer Voluntary Redundancy before making an employee compulsorily redundant does not apply where a fixed term appointment is terminated on its expiry date. As a matter of good practice you should advise the employee when nearing the end of their contract that it will not be extended.

6.3.15 As long as the fixed term employee has at least 2 years qualifying service and is being dismissed for redundancy, they will receive the same compulsory compensation terms as a permanent employee. You should notify the Scheme Administrator in the normal way asking for Compulsory Redundancy terms and giving a Scheme Reference number CR (name of employer e.g. DWP) FTAE (CR DWP FTAE). No compensation is payable for contracts under two years.