New government moves to cap redundancy payments for civil servants

In July 2010, the new UK government confirmed its intention to legislate to reduce redundancy payments available to civil servants. The announcement followed a successful legal challenge by the largest civil service trade union to changes to redundancy terms introduced by the previous government. Ministers said they hoped that the legislation would provide the basis for discussions with the civil service unions to reach a ‘fair and practical settlement’.

On 6 July 2010, the new Conservative-Liberal Democrat coalition government in the UK confirmed it intended to legislate to reduce redundancy payments available to civil servants under the existing civil service compensation scheme. The move comes ahead of expected large-scale cuts in civil service posts as the government seeks to reduce the UK’s deficit (UK1005019I). Minister for the Cabinet Office and Paymaster General, Francis Maude, said the measures were ‘an inevitable consequence of current economic circumstances’.

Background

The previous Labour government had also sought to reduce civil servants’ redundancy terms. In 2009, it undertook consultations on proposals for reforming the civil service compensation scheme, leading to agreement in February 2010 between the government and five trade unions on new terms for the scheme. These would have reduced the maximum available redundancy compensation to two years’ pay, with additional protection for the lowest paid.

Fearing a prospective Conservative government would impose worse terms, the deal was accepted by: the FDA (the union for the UK’s senior public servants and professionals); Prospect, the union representing planners, scientists, technical and communication staff in the Government Offices Network; the Prison Officers’ Association (POA); the GMB general trade union; and Britain’s biggest trade union, Unite. However, the Public and Commercial Services Union (PCS), the largest civil service union, rejected the deal. It organised three one-day strikes over the issue and in May 2010 won a legal case in the High Court in which the judge ruled that imposition of the changes without the union’s agreement was unlawful.

Minister Maude, said that the new government’s action to ‘limit the excesses of the current prohibitively expensive [redundancy] terms’ was necessary because of the PCS’s ‘unilateral action in contesting the previous government’s scheme’.

New government proposals

Under legislation to be introduced as soon as possible, civil servants who are made compulsorily redundant will have their compensation capped at one year’s salary. The maximum offered to those taking voluntary redundancy will be limited to 15 months’ salary.

Beyond that, the government said it wanted to begin immediate discussions with unions to see whether agreement could be reached on a new redundancy compensation scheme for the civil service, including additional protection for lower paid staff and a cap on the maximum payout to individuals made redundant. Such a scheme would have to be affordable in the current economic climate and the government intended to ‘control the overall cost of compensation payments’. However, in a letter to the civil service unions, Mr Maude said there remains scope to reach a fair and practical settlement.

Trade union reaction

Responding to the government’s announcement, PCS General Secretary Mark Serwotka said that the High Court case had shown it was unlawful to impose cuts to rights that staff have earned through their service. He added that the union would be exploring the legal implications of the government’s proposed course of action. He added: ‘If ministers are determined to make low-paid public servants pay for a crisis caused by bankers and traders, we will use all the means at our disposal to fight back.’

A spokesperson for Prospect said the government’s plans were unlawful and undeserved and a breach of election promises made by both governing parties. It pledged to fight them in the courts and the House of Commons. Deputy General Secretary Dai Hudd said: ‘These rights are protected by law and bullyboy tactics will not get round that fact.’

For the FDA, General Secretary Jonathan Baume called the government’s approach unreasonable and unacceptable. He called for ‘meaningful’ negotiations, adding that the agreement reached in February represented a fair balance between the government’s requirement to make ‘efficiencies’ and protection and fairness for FDA members, and that it should form the basis of any future negotiations.

Commentary

Reduced redundancy terms are only one of a range of major challenges currently facing civil servants, and the unions that represent them, as the government pursues radical public expenditure cuts. A two-year pay freeze, significant jobs losses and adverse changes to public sector pensions are also in the pipeline, in addition to which the government is reportedly planning to reform civil servants’ sick pay arrangements and introduce greater regional variation in civil service pay. How the various civil service unions respond to these changes remains to be seen, but the possibility of industrial action at some stage, at least by the more militant PCS, seems strong.

Mark Hall, IRRU, University of Warwick

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