COMPENSATORY BENEFITS PAYABLE

The compensatory benefits payable to employees being released under this policy will depend on the employee’s age and, length of continuous service, whether they are leaving on redundancy or efficiency grounds and whether they are members of the STSS.

In accordance with the discretions that are available to an employer, the Council shall apply the following benefits.

For employees who VOLUNTEER for release under the Policy

1.Voluntary Severance

The benefit that will apply to an employee who has their declaration for voluntary severance approved by the Council, will be a Voluntary Severance Payment. This payment is payable to all employees to whom this policy applies who have their declaration for voluntary severance approved by the conveners. This is irrespective of them being a member of the pension scheme or not.

The Voluntary Severance Payment applies where an employee chooses to leave the Council’s employment on a voluntary basis (i.e. the employee has not been issued with a dismissal notice on the grounds of redundancy) they will receive a one off lump sum “Voluntary Severance Payment” based on their age and completed years of service (see Voluntary Severance Payment Ready Reckoner). The voluntary severance payment includes any statutory redundancy payment for which the employee would qualify.

A week’s pay will be the employee’s basic pay up to the statutory maximum payment*. For employees whose basic pay exceeds the statutory maximum payment* their payment will be the statutory maximum payment* PLUS 33% of the difference between the statutory maximum payment* and the employee’s basic weekly pay.

See note below for circumstances under which a voluntary severance payment can be withheld or reduced.


NOTE – when redundancy/severance payments can be reduced or withheld

When calculating a redundancy/severance payment, the Council will apply normal  basic contractual pay, capped at the statutory maximum payment, except where the employee behaves in such a way that any mitigation of the redundancy dismissal has not been possible (e.g. not co-operating with the redeployment search).

There is likely to be a loss of entitlement to a redundancy payment (or voluntary several payment due to be made on redundancy grounds where:

  • the employee commences employment with an organisation covered by the Redundancy Payments Modifications Orders within 4 weeks of their leaving date
  • the employee is redeployed to another job in the Council before the end of their notice period
  • the employee refuses an offer of suitable alternative employment
  • the employee leaves employment before the leaving date set by the Council
  • the employee is dismissed for some other reason during their notice

2.Early Retirement on Grounds of Redundancy (this option only applies to members of the STSS who are able to access their pension benefits with the employer’s consent)

Where an employee in the STSS VOLUNTEERS for early retirement on the grounds of redundancy and qualifies under the pension regulations (i.e. Pension Scheme Member aged 55 and over OR from age 50 for any existing member on 31 March 2009 with minimum 2 years membership who leaves on or before 5 April 2010) to immediately access their pension benefits with the consent of the employer, and this is approved by the convenors, they will qualify for the following payments:

  • Where an employee chooses to leave the Council’s employment on a voluntary basis (i.e. the employee has not been issued with a dismissal notice on the grounds of redundancy) an one off lump sum “Voluntary Redundancy Payment” based on their age and completed years of service (see Early Retirement Redundancy Ready Reckoner). The voluntary redundancy payment includes any statutory redundancy payment for which the employee would qualify,
  • A weeks’ pay will be the employee’s basic pay up to the statutory maximum payment*. For employees whose basic pay exceeds the statutory maximum payment* their payment will be the statutory maximum payment* PLUS 33% of the difference between the statutory maximum payment* and the employee’s basic weekly pay

Normally, employees who are members of STSS can receive a refund of their contributions when they leave the STSS is they have not qualified for benefits.


Note – Mutually Exclusive Benefits – Early Retirement on the grounds of Redundancy

The benefits under 1 and 2 above are mutually exclusive. Where an employee qualifies and chooses the benefits under 2 the benefits under 1 will not apply. Such an employee can opt for the benefits under 1 instead of 2.

3. Efficiency of the Service

In certain situations it may be in the Council’s interest to allow employees to leave on the grounds of efficiency of the service. This will normally be where an employee is on a protected salary and there is still a requirement for the post they occupy to remain on the structure. By releasing the employee there must be a saving to the Council (please refer to the paragraph on the cost efficiency test).

Where an employee who is in the STSS is able to access their pension benefits this will normally be supported by the employer without actuarial reduction. However, as there is no redundancy situation there will be no one off voluntary redundancy payment.

Where an employee is unable to access their pension benefits through an efficiency of the service case, (or does not wish to access their pension benefits) they may choose to request their case be considered under the voluntary severance option under 1 above. (Please refer to the note below – mutually exclusive benefits)


Note – Mutually Exclusive Benefits – Early Retirement on the grounds of Efficiency of the Service

Where the Council determines that the Efficiency of the Service case does not satisfy the cost efficiency test, the employee may request their case to be considered under 1. above. It should be noted that the benefits under 1. and 3. are mutually exclusive.

4. Early Retirement with actuarial reduction

There are circumstances where an employee in the STSS may request to retire early. Teachers aged 55 or over who have pensionable or excluded employment on or after 1 July 2002 can apply for Actuarially Reduced Pension Retirement. In such cases, the consent of the employer is required, but such consent cannot be withheld for more than 6 months from the date on which the request is made.

If there is not a redundancy or efficiency of the service (see below) an employee may apply to retire early (i.e. leave employment and be permitted to access their pension benefits.) In such cases where the employee, under the pensions regulations, is able to access their pension benefits, which will be actuarially reduced, the Council will consider each request on its individual merit. There is no obligation on the employer to approve any such application.

5. For employees in a compulsory redundancy situation

All employees in a COMPULSORY redundancy situation (i.e. have been placed on contractual notice of compulsory redundancy) will have the statutory minimum provisions applied which is

  • Half a week’s pay for each full year of service where age during year less than 22
  • One week’s pay for each full year of service where age during year is 22 or above, but less than 41.
  • One and a half weeks’ pay for each full year of service where age during year is 41+

The Compulsory Redundancy Ready Reckoner indicates the number weeks an employee will be entitled to. The rate of weekly pay will be up to the Weekly Statutory Maximum payment*

6. Calculating One Off Payments

Payment shall be calculated by using the appropriate ready reckoners below where an employee’s age and length of continuous service will determine the number of weeks pay to which they will be entitled.

Once the number of weeks entitlement is determined the payment can be calculated by multiplying this by the weekly statutory maximum payment*. This is the entitlement for employees in a compulsory redundancy situation

For those in a voluntary severance or early retirement due to redundancy situation (i.e have not been served with a compulsory redundancy notice) whose weekly rate is greater than the weekly statutory maximum payment*, the payment will be increased to the value equivalent of 33% of the difference between the weekly statutory maximum payment* and the basic weekly pay of the employee at the time of leaving.

A number of example calculations are available in Worked Examples of Calculating VSER.

7. Pension Enhancement

The Council will not normally exercise its discretion to award enhanced pension benefits to employees seeking early retirement who are members of the STSS. Only in cases where there are exceptional circumstances determined by the Director of Corporate Governance on recommendation of the Service Director and approved by the Convenors of Education, Culture and Sport and Finance and Resources shall enhancement be considered and granted.

8.Qualifying Service for Redundancy Purposes

The qualifying service for calculating a severance /redundancy payment is a continuous service with an organisation covered by the Redundancy Payments (Continuity of Employment in Local Government, etc) (Modification) Orders, which cover local authorities and related bodies. This must be a minimum of 2 years. Continuity of employment is broken if the period of time between an employee leaving and re-entering local authority service exceeds one week.

See Note – when redundancy/severance payments can be reduced or withheld for circumstances under which a statutory redundancy payment can be withheld or reduced.

9. Phased Implementation Schedule

The compensatory benefits in respect of enhanced pension years, one-off voluntary severance and redundancy payment outlined above represent the final position of the policy. There will be a phased introduction of these compensatory benefits in accordance with the table shown below


Note – when redundancy/severance payments can be reduced or withheld

When calculating a redundancy/severance payment, the Council will apply normal basic contractual pay, capped at the statutory maximum payment, except where the employee behaves in such a way that any mitigation of the redundancy dismissal has not been possible (e.g. not co-operating with the redeployment search.).

There is likely to be a loss of entitlement to a redundancy payment (or voluntary severance payment due to be made on redundancy grounds) where:

  1. the employee commences employment with an organisation covered by the Redundancy Payments Modification Orders within 4 weeks of their leaving date
  2. the employee is redeployed to another job in the Council before the end of their notice period
  3. the employee refuses an offer of suitable alternative employment
  4. the employee leaves employment before the leaving date set by the Council
  5. the employee is dismissed for some other reason during their notice period

Note – annual leave and notice periods

Normally any balance of annual leave should be used before leaving and the employee will continue in employment during their contractual notice period. This will avoid the need to pay in lieu of notice or for untaken annual leave and thereby reduce costs.

Employees are usually entitled to one week’s notice for each year of service up to a maximum of 12 weeks` notice. The service counted for calculating notice is all continuous local authority service with an organisation covered by the Modification Orders.

Notice periods can be waived by mutual consent, there is no facility to pay in lieu of notice.


Note – income tax on compensatory payments

For those employees who only qualify for lump sum payments, (e.g voluntary severance / redundancy) the Council is advised by HMRC that any such payment will be tax free as long as it does not exceed £30,000, but this will depend on the rules determined by HMRC that apply at the time.

Relevant Documents and Links

Click here to return to the VS/ER Teachers page

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