There are plans to cut generous redundancy payments for the 500,000 civil servants in Britain. Quentin Colborn examines the issue and questions what employers are trying to achieve by such payments.
If one topic has been on the lips of HR people over the last year then ‘redundancy’ has to be close to being top of the list. A sad reflection of the times, but many organisations have had to reduce headcount. Some will have avoided compulsory losses, others will have used layoffs and short-time working to alleviate the impact while retaining their skilled workforce. But, inevitably, there have been cases where compulsory redundancy has been necessary. And in the majority of cases that’s where redundancy payments come to the fore.
The concept of statutory redundancy payments has been with us for over 40 years now and one of the key aspects of the scheme is the cap on a week’s pay. Effective fron October, the weekly cap will be increased to £380 per week, so in reality this means that those who earn more than £20K, and have the misfortune to find themselves made redundant, will find that their compensation is capped to what many may feel is a derisory figure.
Last week, The Times suggested that the public sector unions are looking at a legal challenge to recent proposals to reduce the level of compensation provided to civil servants who lose their jobs through redundancy. According to the newspaper, payments are being capped at two years’ pay resulting in some individuals being tens of thousands of pounds worse off.
A cap on pay
Apparently, under the Civil Service Compensation Scheme (CSCS), any civil servant whose role is made redundant and cannot be redeployed is entitled to a payment that not only is uncapped on a weekly basis, but is also much better than many experienced within the private sector. The CSCS guide uses as an example: Colin is aged 41 with 12 years’ reckonable service; this entitles him to a total of 29 months’ compensation payment. Under the statutory redundancy payment provisions, the normal entitlement would be 12 weeks’ redundancy pay. Apparently the new proposals that have been quoted elsewhere have a cap of two years’ salary on any payment. So, do we see this as being fair?
To my mind, as far as the employee is concerned the cap on weekly earnings is unfair. The intention of redundancy payments is to provide some compensation for the loss of income suffered by the employee, and we know that many earn well in excess of £20K per year. Of course it could be argued that those earning over £100K should have a cap, but those cases are so few and far between that we need not address them. So if a group of employees have an uncapped redundancy scheme, as well as a calculation of a months’ pay that is well ahead of the norm then surely it is right to examine those terms and consider if they are fair within the wider context.
I do not believe that just because someone is a civil servant they are ‘fair game’ to have their terms and conditions trawled over and subject to open personal discussion. However we are now in the realm of greater transparency, whatever we think of that, and as our ‘servants’ surely members of the civil service can expect their ‘masters’ to take a view on terms and conditions.
Obviously changes to terms and conditions have to be negotiated through established structures, but why is it unreasonable to seek to change the existing arrangements? I suspect that many outside the public sector will still find the new proposals, with a cap of two years’ pay, as being highly attractive and vastly better than those currently enjoyed by many employees. I have worked with many smaller businesses, some of which have had to make staff redundant and have simply paid the statutory amounts; they could not afford to do more. While we don’t have to go down to the lowest common denominator, haven’t we got something out of kilter here, and the sooner it’s put right the better?
How do you see big redundancy payments? Fine if you are on the receiving end, but bad if you have to pay for them? Should there be a cap on total redundancy payments? If you could redesign the redundancy pay framework, what would you do?
Quentin Colborn is an independent HR consultant based in Essex who advises management teams on operational and strategic HR issues. Quentin can be contacted on 01376 571360 or via his website at www.qcpeoplemanagement.co.uk
