Date posted: 01/07/2009
Audience: HR staff involved with departures attracting compensation under the CSCS
Action: You should:
- Note that changes are proposed to the CSCS for departures from 1 January 2010.
- Make sure that your organisation has carried out the actions detailed in Cabinet Office’s letter to HR Directors (attached). In particular, it is important that staff are told about the proposals as soon as possible
- Read the proposal document Fairness for All and the Q&A material (attached) and make sure that you and the relevant staff in your organisation understand the proposed changes.
- If you have any ongoing or proposed exit schemes, determine how they should be treated. The Cabinet Office guidance document (attached) should help you with this.
- Note the proposals to make additional payments to those leaving on or after 16 July 2008 on CER terms aged between 57 and 60 and to those leaving on or after 1 April 2009 on CER terms and aged over 60. You need to work with your APAC to identify these cases and make sure that your Finance colleagues are aware of the cost implications.
- Consider attending a seminar (booking form attached)
Timing: As soon as possible - the proposals were made public and put to the Civil Service trades unions on 31 July 2009.
- The following documents are enclosed with this EPN:
- Dusty Amroliwala’s letter of 29 July to HR Directors
- Proposal document Fairness for All
- Guidance on handling exit schemes and exits after 31 December 2009
- Model letter to staff
- Seminar booking form
The reform proposals
- Work to reform the terms of the CSCS has been ongoing for some time. Following extensive discussions with Civil Service senior management and with the Civil Service trades unions, Cabinet Office has now put formal proposals to the unions and to Civil Service employers and comments may be made until 5 October. The proposal document, Fairness for All, is available on the pensions website
- The key aspects of the reform proposals are:
- The current CSCS terms are expensive, inflexible and increasingly difficult to maintain in relation to age discrimination legislation. While fit for purpose when introduced in 1987, they do not suit today’s Civil Service
- The current Compulsory, Flexible and Approved categories will go. For the future, a distinction will be made between:
- Genuine compulsory redundancy cases; and
- Other exits (including where employers ask for volunteers to leave)
- Genuine compulsory redundancies will receive a severance payment calculated according to a central tariff. This will be service-based and subject to a maximum of 2 years’ pay. The current Compulsory terms will continue to be available to existing staff whose current period of service began before 30 July 2007 and who leave on genuine compulsory redundancy with a last day of service before 1 April 2011. Genuine compulsory redundancy cases will be identified through the Protocol for handling staff surpluses (and, as such, will be authorised by Cabinet Office)
- In other early exit cases, employers will have some discretion to work up terms to suit their business needs and budgets. Compensation will generally be paid as a severance payment up to a maximum of 2 years’ pay but employers will be able to offer early retirement for those aged 55 and over (effectively up to the equivalent of Approved Early Retirement). Cabinet Office will work up and issue guidance on the controls that will apply and on the issues employers need to consider. We anticipate that this guidance will be issued in draft during summer 2009.
- Compensation will be payable regardless of age. However, a distinction will be drawn in relation to those who have access to an unreduced pension largely funded by the employer. In these cases the cap on the compulsory redundancy payment will be six months’ pay and tapering will apply for those close to pension age (so as to avoid a cliff edge).
- Under current tax law, the first £30,000 of any severance payment is tax-free.
- As now, employers will meet the full costs of severance payments and early retirement. However, accountability for compensation payments will be improved. Cabinet Office will work with Treasury to agree the basis for employers reporting the number and cost of exits in their resource accounts (starting with those for 2009-10).
Communications, guidance and consultation
- Dusty Amroliwala, Cabinet Office’s Director Civil Service Workforce, has written to HR Directors about the changes and a copy of this letter is attached. Please note the requirement to issue a communication to all staff. Q&A material is attached and is also available on the CSCS reform page on the pensions website.. We will update the Q&A material held on the website in the light of feedback received and you may wish to direct staff to the website. Any media queries on the reforms should be redirected to the Cabinet Office press office.
- We anticipate that the unions will wish to consult their members before providing their formal response to Cabinet Office by 5 October. Staff may make comments via their unions or direct to Cabinet Office either by post (details in the proposal document) or by email to email@example.com Comments from employers are also welcome.
Understanding what the proposals mean for you
- We have arranged a programme of seminars during August and September. These are intended for HR staff involved with exit schemes and we will be explaining the proposed changes and giving you a chance to ask questions. We will use the Employer section of the website to give you feedback on the issues raised at the various seminars. A booking form is attached to this EPN. We are content for organisations to send up to 2 delegates but, as demand is likely to be high, we ask that you make every effort to attend if you make a booking. Please note that completed booking forms should be emailed to CSP_events@cabinet-office.x.gsi.gov.uk rather than to the Employer Helpdesk.
- If you have any exit schemes in progress, your main concern is likely to be around the impact of the proposals on the terms offered. We have worked with our legal advisers to prepare some guidance covering (a) when terms crystallise and (b) a range of possible scenarios. If you have other scenarios, please let us know via the Employer Helpdesk. Depending on your own particular circumstances you may, however, need to take your own legal advice.
- Pension administrators (APACs) will be able to send representatives to the employer seminar. We propose to supplement this with an APAC seminar and will also provide APACs with a calculator to support the proposed terms (pending confirmation of the detail of the rule changes and amendments to PenServer). However, you may wish to consider the approach you take in calculating compensation payments in future – especially where you are designing your own discretionary scheme – and possibly carry out your calculations in-house using payroll data. Your APAC will, however, need to calculate transitional terms where these are appropriate.
- The Employer Helpdesk is of course available to deal with queries which are not dealt with in the Proposal document, the Q&A or the guidance on handling existing exit schemes. But if your query is not urgent, we would ask that you consider raising it at one of the seminars.
The Wallis Judgment – impact on CER payments
- We plan to take the opportunity of amending the CSCS rules to make changes to reflect the outcome of the Employment Tribunal judgment in Wallis. The effect of this (once the CSCS rules are changed) will be that the 6-month lump sum element of CER payments, to those aged between 57 and 60 at the date of departure, will be paid in full rather than being tapered. You should work with your APAC to identify all such cases with a last day of service of 16 July 2008 or later but (except where grievances have been raised – see EPN251) you should not make these top-up payments until the rules are amended (probably towards the end of the calendar year) and your APAC has authority to revise the CER award. Payments will then be subject to the addition of interest. You and your APAC will need to ensure that there is no double-payment to those who have received early payment of the CER top-up in consequence of raising a grievance, or lodging a claim through IDR or with the Employment Tribunal.
- The Wallis judgment did not extend to those aged over 60 at the date of departure but we propose to amend the CSCS rules to cover this group as well (provided they left on CER rather than CES terms). Accordingly, those with a last day of service of 1 April 2009 or later will need a top-up payment representing the difference between the full 6-month lump sum and the payment calculated on the statutory redundancy basis. Again, APACs will revise awards when the rules are changed and payments will be subject to the addition of interest. As with those have already had a top-up on an ex-gratia basis in consequence of lodging a grievance or other claim.
- You should ensure that your Finance department are aware of the additional CER top-up payments.
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