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Thursday 24 November 2016

What’s happening to redundancy payments in the NHS?

By Craig Ryan

New Treasury proposals could cut NHS redundancy payments by thousands of pounds, but unions are pressing hard for better terms in negotiations. 

It’s hard to imagine a worse time to throw the NHS redundancy arrangements up in the air, but that’s what the government is doing. Employers and unions will spend the next nine months negotiating new redundancy terms for the NHS in England, just when the uncertainty and upheaval facing NHS staff has never been greater. 


The NHS Staff Council, which brings together employers and unions at national level, has begun negotiations within a framework set out by the Treasury in September. This comes on top of measures already in the pipeline to clawback payments to staff on over £80,000 who return to work anywhere in the public sector within a year, and to cap all public sector redundancy payments at £95,000. 

Treasury openers

The Treasury’s five “criteria” for negotiations are:

  • Reducing the standard “tariff” for redundancy payments to 3 weeks per year of service (currently 4.35 weeks in the NHS)
  • Capping payments at 15 months’ salary (currently 24 months in the NHS)
  • Reducing the maximum salary for calculating payments to £80,000 (this is already the maximum in the NHS following changes agreed in 2015)
  • Limiting the use of redundancy payments to fund early access to pensions (such “employer top-ups” were removed from the NHS scheme in 2015)
  • Tapering redundancy payments for staff nearing retirement age 

That’s the bad news. The good(ish) news is that there is a strong chance of improving on these terms in negotiations.

Substantial cuts 

As things stand, even the Treasury estimates its proposals will save just £250m, less than 0.25% of the NHS budget. But they could still mean substantial cuts in redundancy entitlements for many MiP members. For example:
  • A Band 8b manager on £57,640 with ten years of service would see their redundancy payment fall from around £48,000 to £33,000; with 30 years of service, it would be cut from £115,000 to £72,000.
  • A Band 9 manager on £99,437 with ten years’ service would see their entitlement fall from around £67,000 to £46,000; with 30 years’ service, the government’s cap would kick in and they would receive £95,000, compared to £160,000 now. 

Obviously, MiP and Unison will be doing everything in their power to make sure that doesn’t happen. 

Lessons from Whitehall

The recent settlement in the Civil Service, negotiated by the FDA and other unions, shows there is plenty of scope to improve on the Treasury proposals. For example, it improves the cap on redundancy payments to 18 months’ salary and the maximum salary for calculation to £149,950. 

“The Treasury has torn up existing agreements at the worst possible time,” says MiP chief executive Jon Restell. “Employers and unions need the flexibility to negotiate redundancies. With STPs and the effects of the funding crisis, no one needs this – not employers, not staff and certainly not the NHS as a whole.”

UNISON deputy head of health Sara Gorton says NHS unions will be pressing for savings already made in the NHS to be taken into account: “NHS staff will feel particularly aggrieved as they have only recently concluded a set of changes to the way the scheme operates in England.

“It won’t be lost on staff that a ‘policy’ which started with tabloid attacks on ‘fat cat’ executives has morphed into a threat to cut terms and conditions for the vast majority of the NHS workforce,” she adds.

Better redeployment schemes

MiP will also use the negotiations to press for a comprehensive NHS redeployment package . “As we saw with the upheaval created by the Lansley reforms, it’s crazy that the NHS doesn’t have a better system for redeploying staff displaced by service changes, or any interest in aligning change to maximise redeployment opportunities,” says Restell. 

“Millions of pounds have been wasted on unnecessary redundancies and employing consultants. We need to make sure we don’t repeat the same mistake with STPs.”

Negotiations have already begun and are expected to continue until June 2017. MiP will be fully involved in the discussions and will keep you informed every step of the way.

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