New Arrangements for Redundancy Payments
Background
On 1 October 2006, legislation came into force which made it unlawful in employment or vocational training for individuals to be indirectly or directly discriminated against due to their age. As the arrangements for redundancy payments in NHSScotland were age based, they had to be reviewed.
The review was undertaken in partnership between NHS employers, trades unions and Health Departments across the UK. New arrangements were agreed in July and after consultation were introduced with effect from 1 October 2006. These new arrangements apply to all members of staff employed directly by NHSScotland.
Summary of the New Arrangements
Those staff who are either under the minimum pension age or are over the minimum pension age but are not members of the NHS pension scheme in Scotland will receive one month’s pay per year of reckonable service up to a maximum of 24 months pay.
Staff who are members of the NHS pension scheme in Scotland and are over the minimum pension age can opt for either a redundancy payment as described above, or early retirement with no actuarial reduction to their NHS pension. The cost of the early retirement option will be met by the employer from the amount of the lump sum redundancy payment which would have been paid had the member of staff chosen that option, and where the capitalised cost of early retirement is less than the redundancy lump sum payment, the balance will be paid to the member of staff. Where the capitalised cost of the early retirement is higher than the redundancy payment due, the employer shall pick up the balance of the cost.
Transition Arrangements
It was agreed during the UK review that while the pension enhancement available on retirement on the ground of redundancy under the old arrangements was potentially unlawful, it should not be removed immediately. It was therefore agreed that there should be a five year transition phase.
Staff over 50 with at least five years’ pensionable service in the NHS pension scheme made redundant with effect from the 1 December 2006 have a choice between payment under the new arrangements or accessing pension benefits under transitional arrangements, which are as follows;
Implementing the new arrangements
The new arrangements apply from the 1 October 2006, and were put into effect by NHS Circular PCS(RED)2006/1.
Revised terms and conditions
Agenda for Change
The redundancy arrangements for staff covered by the Agenda for Change agreement are contained in section 16 of the terms and conditions handbook, which has been revised to reflect the new arrangements.
Other directly employed staff
The terms and conditions of all other directly employed NHS Scotland not covered by Agenda for Change have also been revised. Also available Other Professions circular implementing theses changes.
Employer's briefing on the new arrangements
An employer’s briefing has been produced, which provides a summary of the new arrangements, including the key differences from the old arrangements. It also outlines the steps that employers need to take in order to implement new arrangements.
Retirement and redundancy: the right approach - wider briefing for employers
Employers need to ensure that the arrangements they have in place for and redundancy comply with the new age regulations. A guide outlining what employers need to be aware of and the pitfalls to look out for is currently being produced and will be available shortly.
Ready Reckoner
To support employers in calculating redundancy payment, an electronic ready reckoner has been produced. The reckoner can be used to make quotations for redundancy/retirement benefits but please be aware that the figures which will be quoted are based on the information input by the user. Final pension scheme benefits should be calculated by the pension administrators at the Scottish Public Pension Agency, and based on confirmed membership and pensionable pay at the point of accessing the pension benefits.
Also available are guidance notes on the use of the ready reckoner and a suggested letter template to be used when advising staff of estimated payments.
New arrangements in practice
A working example of the new arrangements in practice is available.
Contacts
Employees – if you are a health Board employee and have any questions about the new redundancy arrangements, you should in the first instance contact your local HR Department.
Employers – if you are an NHS employers and have any questions about the pensions aspects of the new arrangements, you should contact the Scottish Public Pensions Agency (SPPA). The relevant contact details are on the SPPA website. Alternatively, you can call them on 01896-893000. Any other questions should be directed to John Provan, Scottish Executive Health, Workforce Directorate at john.provan@scotland.gsi.gov.uk.
