After 18 months of discussions, the changes to the Civil Service Compensation Scheme have now been agreed with five unions and laid before Parliament. They’ll come into effect on the 1st of April this year.
Why are we making these changes?
But what about people who take voluntary redundancy?
The main reason we have made the changes is that the scheme was out of date and more expensive than almost any other available, including those available to other public service workers like teachers and nurses. Modernising exit terms is one part of a wider reform programme to ensure the Civil Service is in the best possible position to face the future. There has also been action to improve departmental capability, leadership, recruitment and efficiency.
But, there were other reasons too. The original terms can encourage what is often called ‘perverse incentives’ – where, because of the generosity of the scheme, it could be perceived to be in someone’s interests to try and leave, rather than stay. Also, the scheme had been challenged under age discrimination law because of its age related features. The new rules mean the scheme is now in line with age discrimination legislation.
The changes are both fair to staff and to the taxpayer and, in particular, have been designed to protect lower paid workers. So, in fact a long-serving Civil Servant earning £20,000 or less can get up to £60,000 – the same as now. Also, because the accrual rate under the new compulsory redundancy terms operates in the same way for everyone, some younger civil servants would get a better deal under the new scheme than under the current terms. For instance, a civil servant earning £25,000 a year, who is aged 35 and has 18 years’ service would get just under £48,000 if made redundant under the current terms. Under the new terms he or she would get £60,000.
And let’s not forget we’re only talking about people who are made compulsorily redundant. Since 2004, less than 100 Civil Servants, who wanted to carry on working, have been made compulsorily redundant.
How long has this process been going on? What about accusations that the Cabinet Office has been acting unilaterally?
It is at the discretion of each department to determine the amount of compensation paid to staff who take voluntary redundancy, but they have to work within Cabinet Office guidelines. The maximum payment for all staff will be two years pay.
The changes will also help improve accountability and transparency, as, from April, details of all compensation packages paid out will need to be published in departments’ annual accounts.
What do the other unions really think about the deal?
There have been some suggestions that the Cabinet Office has acted “unilaterally”, but this is absolutely not the case. The Government has involved the Civil Service unions in the whole process.
For those of you who have been following the discussions from the beginning, you’ll know that this has been a long process. The changes that were announced last week were agreed after 18 months of discussions with the Civil Service unions and with staff – over 18,000 took part in the consultation process last year. Over this period there have been numerous meetings to talk about the reforms.
In total, six Civil Service unions took part in these talks – the FDA, Prospect, Prison Officers’ Association, the GMB, Unite and the PCS. Far from acting unilaterally, five of those six unions have publicly signed up to the deal, saying it is fair and appropriate.
One Civil Service union – the PCS – has not agreed to the changes.
Will the changes lead to job cuts?
When the scheme was announced last week, it was done jointly with five Civil Service unions – the FDA, Prospect, Prison Officers’ Association, the GMB and Unite. This is because all of these unions took the changes to their own committees and all voted to give them their full support.
In fact, these five unions, who between them represent a cross section of civil servants across all grades and departments, have all publicly said the changes are balanced and appropriate and offer the best deal for civil servants.
They believe the deal addresses their key concerns:
- The underpin for people earning less than £30,000 has been raised from £50,000 to £60,000, offering the lower paid more protection than originally proposed.
- And, more people can get early access to an enhanced pension, offering those closest to retirement more protection.
Here are some of the things those five unions have been saying about the changes:
Jonathan Baume, FDA General Secretary:
“The new redundancy terms represent a package that is balanced and, overall, fair to our members. We have been particularly concerned that the terms should take account of the position of low paid civil servants and those close to retirement, and are pleased that they now do so. …”
“We have for the first time reached an agreement with five unions outside the traditional civil service bargaining structure. These five unions represent between them a cross section of our staff across all grades, ages and professions, and have taken a constructive approach throughout these difficult negotiations.”
Dai Hudd, Prospect Deputy General Secretary (Speaking to Personnel Today):
“The legal action was over a finite point of law on whether the scheme accrues in a way a pension does – not about contractual rights as the PCS has suggested.”
How does the Civil Service Scheme now compare to other schemes?
The truth is that since 2004 less than 100 people, who have wanted to continue their Civil Service careers, have been made compulsorily redundant. Compared to many other professions, that is a small number each year and the Civil Service has made it absolutely clear that compulsory redundancy will always be a last resort.
What are the key changes to compulsory terms?
Lots of private sector employers only pay statutory redundancy. This means that the maximum payment a member of their staff could get is £11,400. To qualify for this maximum payment you would need to be aged 61 or more and have at least twenty years service.
So, for example, if you’re 45, earn £24,000 a year and have been in your job for 25 years, you would get £8,360 under statutory terms, if you were made redundant.
Under the updated Civil Service Compensation Scheme terms, if you were in the same situation, with the same salary and number of years service, you would get £60,000 cash payment.
But how does this compare to the public sector?
If you work for the NHS, you would have access to a scheme which pays 1 month’s pay per year of service, up to a maximum of two years pay. So, as above, if you were 45, earning £24,000, with 25 years service, your redundancy payment would be £48,000.
What does the new scheme mean for you if you earn £20,000 or less and are made redundant?
The new terms mean that, subject to transitional arrangements, the maximum compulsory redundancy payment will now be set at two years pay for those earning £30,000 or more.
For those earning less than £30,000 (four fifths of all civil servants), the maximum compulsory redundancy payment will now be a £60,000 ‘underpin’ or three years pay, whichever is the lower. To qualify for this maximum payment you would need to have worked in the Civil Service for 20.5 years or more. (In December, the level of underpin offered was £50,000.)
If you are made redundant during the year 1 April 2010 to 31 March 2011 you will continue to have the option of the current Compulsory terms.
What does the new scheme mean for you if you’re earning between £20,000 and £25,000 and are made redundant?
If you go through the key changes, you will see that the rules are not the same for everyone. There is a two year cap for higher earners, but we have introduced special protection for the lower paid. The special protection means that anyone earning £20,000 or less can still get up to three times their salary (which is the limit under the previous scheme) or £60,000 – whichever is lower. This covers a significant proportion of the Civil Service community as the latest figures suggest that 46% of civil servants earn £20,000 or less.
So, if you are earning £20,000 or less, it is likely that you will be little affected by these changes. Under the previous scheme you would have been entitled to three years pay after long service and you will be entitled to the same under the new scheme.
What do the changes mean if you’re earning more than £30,000 and are made redundant?
If you earn £25,000, you’ll also be covered by the special protection for the lower paid. This means that you can get up to three years pay or £60,000 whichever is lower. This level of compensation compares well with other workplace redundancy schemes, especially those available in the public sector.
So, if you’re on £24,000 and you’ve been here for 20 years you would get £60,000 instead of £72,000. This is a difference of £12,000, not the £20,000 that has been reported in the media recently.
What’s the impact if you’re over 50, or close to retirement, and are made redundant?
If you earn more than £30,000 you will also get a high standard of protection and a compensation package that is in line with - or compares very favourably - to those available in the wider public sector.
For people in this group, cash compensation payments will be capped at two years pay, subject to transitional arrangements. (The transitional arrangements are explained below).
Are there any transitional arrangements for people who’ve been in the Civil Service a really long time – more than 20 years?
There are what we call transitional arrangements in place - and these exist to protect people closest to retirement. So, if you’re aged 50 or more on the 31st of March this year – you’ve been here for at least five years - and you’re made compulsorily redundant – you will continue to receive existing compulsory early retirement terms.
This means you will still have the option of an early, enhanced pension based on your years of service as at 31 March 2010. This is a new term, not included in the provisional proposals we published in Fairness For All, or the terms put forward in December.
The Cabinet Office has recently challenged the accuracy of some of the statements made in the PCS literature supporting its ballot for industrial action; why has this been done?
Yes. This doesn’t apply to most people, but if you’re one of those people who joined before 1987 then there are some additional transitional arrangements in place which may protect you.
If you joined before 1987 and were then in a “mobile” grade, you may currently be eligible for a ‘reserved right’ severance payment. Under the new scheme, you will continue to get a severance payment based on your years of service as at 31 March 2010. But, over the four years from 1 April 2011, the cash value of this payment will be tapered to be of equivalent value to the new terms.
This is also a new term and you wouldn’t have read about it in previous proposals.
What will happen to services if PCS members go on strike?
It is important that all Civil Servants have access to accurate information about the changes.
Some of the PCS literature given to staff has stated that “people over 50 would lose their rights to an enhanced pension.” In fact, any civil servant who is aged at least 50 and has a minimum of five years’ service at 31 March 2010, will have the option of an enhanced pension – rather than a severance payment under the new terms - if they are made compulsorily redundant.
Also, some PCS literature has also stated that “for people with longer service, the proposed cuts would be the loss of a third of their entitlements, possibly tens of thousands of pounds.” In fact the changes to the compensation scheme mean that:
- The redundancy terms for people over pension age and people at the younger end of the scale are better than before.
- Those earning £20,000 or less (almost half of the Civil Service) can get a cash payout of three years’ salary on redundancy, the same as the maximum under the original terms.
- The vast majority (80%) of the Civil Service earns less than £30,000 a year and these people have the potential to have redundancy payments of between two and three years’ pay.
All departments have been issued with contingency planning guidance and all will have their own contingency plans in place. During the most recent civil service wide strikes in 2007, there was no serious disruption to services reported by departments.
Departments which have large numbers of PCS members are very well prepared for any strike action by staff. For instance, DWP has successfully managed several periods of staff industrial action in recent years, with minimal disruption to customers. All of their customer-facing offices would remain open to the public.