The draft Public Sector Exit Payment Regulations 2016 are intended to allow for the recovery of public sector exit payments when a high earner returns to the public sector shortly after leaving.

It was originally proposed that repayment would only be sought if the individual returned to the same part of the public sector. However, the draft regulations have been widened to allow public sector exit payments to be recovered when an individual returns to any part of the public sector.

They are scheduled to come into force on or after 1 October 2016.

What is it?

When an individual’s employment within the public sector is terminated and they return to work for almost any part of the public sector, they will be expected to repay the exit payments they received. The recovery is tapered from the date of exit up to 12 months. No repayment is required after a 12 month break in service.

The draft regulations cover any payments for loss of employment, including redundancy, notice and ‘top-up’ pension payments. However, there are a limited number of exclusions including statutory payments for untaken holiday; statutory redundancy pay; payments made in relation to injury or illness and payments made in compliance with a court or tribunal order.

Who does it affect?

It affects employees and office holders who earn at least £80,000 per annum in the twelve months prior to termination. This equates to the top 2% of earners within the public sector.

For the purposes of the draft regulations, public sector bodies are classified with reference to the Office of National Statistics (ONS)’s definition of public sector. This includes all NHS trusts, local authorities and clinical commissioning groups. There are a limited number of exemptions largely relating to housing associations and public financial corporations.

The regulations apply whether the individual returns to the public sector as an employee or self-employed.

How is it implemented?

Under the draft regulations, individuals will be expected to notify their new and previous employer when they have received a public sector exit payment within the previous 12 months. Similarly, previous employers are expected to make arrangements with individuals directly in cases where exit payments are due to be recovered. New employers should not employ the individual until such arrangements have been made.

Public sector employers will therefore need to consider amending contracts of employment and contracts for services to require new joiners to declare such payments and implement the above legislation.