SEVERANCE SCHEMES. Table of Contents. Policy control
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1 SEVERANCE SCHEMES Table of Contents 1. Aims of the scheme Key points Authority to make decisions 4 4. Procedure Appendices... 7 Appendix 1 Re-employment for staff who have taken a severance deal.. 7 Appendix 2 - Voluntary redundancy scheme ready reckoner. 8 Appendix 3 - Voluntary severance scheme ready reckoner.. 9 Appendix 4 - Making sense of the ready reckoner 10 Appendix 5 - Options form.. 11 Policy control Approved by Contact/s Vice Chancellor s Executive Group Cathy Abu, Director of Human Resources History/Revision dates First version September 2005 Audience Internal (Intranet only) External (Internet) Page 1
2 AIM OF THE SCHEMES The purpose is to: facilitate, voluntary redundancy or voluntary severance for staff where this: 1. is in the interests of the University ; and 2. is expedient in managing change; or 3. may minimise the effect of any compulsory redundancies; or 4. is useful in the achievement of strategic goals; 5. will enable the University and individual members of staff to make choices that facilitate the movement towards a better fit between the future requirements of the University and the staff skills, motivations and interests that are vital to our future success. KEY POINTS Basic principles The University has well-established procedures governing resignations, notice periods, compulsory redundancy and other dismissals. These processes are designed to honour the contractual and other legal rights of staff. They form the standard basis on which employment with the University is ended. However, for practical organisational or strategic reasons, the University may from time to time seek volunteers for: 1. voluntary redundancy; or 2. voluntary severance The two schemes: 1. work by paying a financial inducement to eligible employees; 2. are subject to the costs of payments being balanced by the benefits to the University; 3. will be applied at the absolute discretion of the University. Nothing in any of the schemes is intended to imply any additional contractual rights for: - an employee to retire early; or - the University to impose early retirement; or - any payment to an employee beyond the provisions of a relevant pension scheme or any other legal and contractual entitlement. Definitions A voluntary redundancy package can only be applied to an employee who: 1. is in a pool of staff from whom the University is inviting people to volunteer for redundancy 2. is in a job which is genuinely redundant, [in law redundancy is a dismissal for which the prime reason is that in the place in which the employee has worked: - the employer intends to stop carrying on the business; or - the business is expected to require fewer employees for work of a particular kind.] and - is not about to retire Page 2 of 11
3 A voluntary severance package can only be applied to an employee who: 1. is in a pool of staff from whom the University is inviting people to volunteer for severance; 2. is in a job which is not redundant; 3. is not about to retire Criteria for making decisions Managers deciding the case will: 1. be prudent in their use of public money; 2. balance the costs of the incentives offered to the employee against the benefits to the University; 3. base their decisions on the factors relevant in each case; 4. ensure that decisions reflect the strategic objectives of the University. Managers will ensure that: 1. any decisions they make are within the scope of authority delegated to them. The authority to make decisions under these schemes is set out on page 3; 2. any recommendations they make to those with the appropriate authority are based on the factors relevant in each case. 3. they keep the trade unions informed If the University opts to use one of its agreed severance packages for organisational or strategic purposes, it will not exclude applicants solely because they are on a fixed-term contract. However, the end of a fixed-term contract is not, in itself, enough reason for the terms of any of these schemes to be applied. EVALUATING THE VALUE TO THE UNIVERSITY OF OFFERING A SEVERANCE PACKAGE TO AN EMPLOYEE BENEFITS: The University would expect to: 1. recover the cost, normally within two years by: - an improvement to the overall financial situation in a department, or - keeping the role vacant permanently or for a period of time, or - employing a replacement at less cost. Taken together, the costs of releasing the employee and, if appropriate, replacing them should be no more than the salary costs of the original employee. [In exceptional circumstances, it may be appropriate to recover the costs over a longer period than two years.] 2. benefit by: - avoiding compulsory redundancy(ies) - making a change in staff or structure that contributes to the University s strategic objectives. COSTS: The cost of any enhanced package must amount to no more than: 1. the amount derived from the ready reckoner in Appendices 2 & 3. a) the cost of honouring the employee's contractual and statutory rights, including Page 3 of 11
4 - any rights to accrued leave, notice period, statutory redundancy pay. AUTHORITY TO MAKE DECISIONS Remuneration Committee: - Authority to agree any severance package for staff members whose annual salary is over 70,000 Vice Chancellor s Executive Group (meeting) with Director of HR in attendance - Authority to initiate a search for volunteers to apply for severance for all other cases - Authority to agree an expenditure if there is a material cost not approved in the budget [A material cost is any cost outside the agreed budget.] - Authority to agree any severance package if : - the sum is up to 50,000; or - it is for an employee whose salary is greater than 50,000 Vice Chancellor Authority to: - implement voluntary redundancy or severance (in mutual agreement with the employee) - agree the terms to be offered to an employee on behalf of the University. - Agree any severance package up to 70,000 Senior Managers - Authority to receive applications/screen applicants and decide, on the basis of the future needs of the University, those who can (or cannot) be considered for the severance scheme. CONSULTING OVER OFFERING SEVERANCE PACKAGES Senior Managers will: - consult Vice Chancellor s Executive Group in good time over any proposals to apply any of the University s Severance Schemes; - ensure that any decision to implement a reorganisation with major effects on staff is made only by the Vice Chancellor s Executive Group. Reorganisations with a major effect are those that may involve: - redundancy, redeployment or the transfer of staff to another employer - changes to the contractual pay, hours and leave of staff.; - ensure that any decision on expenditure is approved by the relevant committee(s); - if the relevant decision making body (above) decides that severance packages should be offered: - consult staff and trade unions in good time; - invite applications from the relevant pool of staff; - ensure that they do not raise expectations or give staff the impression they are committing the University to any payments [In practice, payments under this scheme are subject to: - mutual agreement between the employee and the University; any relevant pension scheme regulations; - in some cases, HEFCE agreement; - HEFCE guidelines on severance payments for senior staff. Page 4 of 11
5 - if need be, take advice from the Director of HR Staff are entitled to: - good quality information about the scheme; - be kept informed, if the scheme is to be applied, about: - the order of benefits that they might receive, if any; - why the scheme is being offered; - be kept informed, if they apply for severance: - who will make the decision in their case; - how any application they make is progressing. PROCEDURE APPLICATION FOR ESTIMATED BENEFIT To apply for an estimate, an employee must complete the attached form at Appendix 5 to Human Resources. The estimate is provided for the employees information, it does not mean that an employee has applied for the voluntary severance scheme or that any application made will be approved. After an employee receives an estimate and wishes to proceed they will need to make an application in writing to their line manager. SCREENING AND COSTING APPLICATIONS Senior Managers will: 1 deal fairly and consistently with applications for voluntary redundancy or severance; 2 screen applications to ensure that the University retains staff appropriate to its future needs [The Dean has authority to do this, normally in consultation with the line manager].; 3 inform any employee whose application is not to be put forward that this is so and give them the reason for the decision; 4 put forward the acceptable applicants to the Director of HR in good time for the HR department to calculate the figures for each applicant; 5 ensure that staff are given the figures supplied by HR and are told that: - these are provisional; and - any decision remains subject to mutual agreement by the University and the employee. The employee: is entitled to: 1) be kept informed as an individual on how any application they make is progressing; 2) be given the reason if any application they make is rejected. is responsible for: 1) providing reliable information to enable any application to be assessed; 2) keeping the manager informed of relevant facts and issues. Page 5 of 11
6 MAKING A DECISION Senior Managers will: 1) consult with staff ; 2) refer each case to the Vice Chancellor s Executive group with the Director of Human Resources in attendance for decision, with recommendations about the costs and benefits of the relevant severance package for each eligible applicant; The manager s recommendation should address the balance of costs and benefits as defined in these criteria. The decision will be based on the extent to which the proposal contributes to the University s business, teaching and research objectives 3) if need be, seek approval for any material costs in accordance with financial regulations. [Material costs are costs, which have not been approved in the budget. Approval is required from Vice Chancellor s group for a severance package if: - the sum is up to 50,000; or - it is for an employee whose salary is greater than 50,000] IMPLEMENTING THE DECISION Senior Managers/HR will: 1 communicate the University s decision to the employee and inform their trade union where applicable and, if need be, arrange for the Director of HR to draw up any relevant agreement and for it to be signed by the relevant parties; As well as agreeing the terms of severance, it will also be appropriate to consider whether to: - indemnify the University from any tax liabilities arising from a subsequent default by the retiring employee - draw up a compromise agreement to protect the University from a claim at employment tribunal. 2 implement the decision in conjunction with the HR and Finance departments; 3 ensure that an employee taking voluntary redundancy or severance is not offered further work or a consultancy - unless this can be objectively justified; 4 take account of the severance deal in any subsequent offer of employment and ensure that the employee is no better off than they would have been if the deal had not been made 5 if need be, consult the HMRC on the tax implications of any job offer. Page 6 of 11
7 Appendix 1 RE-EMPLOYMENT FOR STAFF WHO HAVE TAKEN A SEVERANCE DEAL The cost of some of the benefits paid to an employee taking voluntary redundancy, severance or early retirement are borne, not by the University, but by pension funds or the taxpayer (since a proportion of redundancy pay or pay in lieu of notice is payable tax-free). Therefore the University must ensure that its decisions and use of public funds bear scrutiny. There should never be any reason to suspect that the University has, in practice, colluded with former employees to give them access to : - unjustified payments from public funds; - unwarranted tax-free payments; - payments, which breach or bend the rules of a pension fund. The payments made under the voluntary severance or redundancy schemes are paid as an inducement to end employment with the University. HEFCE guidance on severance payments for senior staff is that universities should not offer further work of a consultancy type to the individual. Such contracts may give the perception of an attempt to disguise a pay-off. However, they say that it might be acceptable, for example, for an employee to: - work part-time to see through a cohort of students; or - complete a single specific or time-limited project. Therefore, if continued employment is to be offered, the employee s role must be significantly different. The continued role should be: - part-time; or - for a limited period (set in advance); or - otherwise limited in scope. The University should also identify a specific benefit from having the former employee do the job rather than making some other arrangement. If later re-employment is offered, HEFCE s advice is that all the severance arrangements should be taken into account and the individual should be no better off than they would have been if the severance deal had not been made. The Director of Human Resources, Vice Chancellor and the relevant Deputy Vice Chancellor will jointly decide if it is justifiable to continue to employ (or to reemploy) staff taking some other inducement to leave. Page 7 of 11
8 Voluntary Redundancy Scheme Ready Reckoner Appendix 2 The amount is worked out as a number of weeks pay and is dependent on the number of complete years service with the University. However, be sure to read the notes in Appendix 4. They give important information about: 1 the way the schemes work 2 the way payments are worked out and 3 the maximum amounts payable. The first 30,000 of a voluntary redundancy payment is tax-free. COMPLETE YEARS SERVICE AT UNIVERSITY OF TOTAL WEEKS PAYABLE BEDFORDSHIRE plus OTHER RELEVANT CONTINUOUS SERVICE 1 Contractual notice period and statutory redundancy pay only 2 Contractual notice period and statutory redundancy pay only Page 8 of 11
9 Appendix 3 Voluntary Severance Scheme Ready Reckoner The amount is worked out as a number of weeks pay and is dependent on the number of complete years service with the University. However, be sure to read the notes in Appendix 4. They give important information about: 1 the way the schemes work 2 the way payments are worked out and 3 the maximum amounts payable. * All payments will be taxable COMPLETE YEARS SERVICE AT UNIVERSITY OF TOTAL WEEKS PAYABLE BEDFORDSHIRE plus OTHER RELEVANT CONTINUOUS SERVICE 1 Contractual notice period and equivalent of statutory redundancy pay only 2 Contractual notice period and equivalent of statutory redundancy pay only 3 Contractual notice period and equivalent of statutory redundancy pay only 4 Contractual notice period and equivalent of statutory redundancy pay only Page 9 of 11
10 Appendix 4 MAKING SENSE OF THE READY RECKONER Notes A week s pay is calculated as the total yearly salary x (7/365). Yearly salary is made up of... 1 basic annual salary, plus 2 any other contractual allowances. For voluntary redundancy The maximum payable is normally 6 months (26 weeks) pay. However, the Vice Chancellor may, at his/her absolute discretion, opt to increase the payments in the ready reckoner subject to: - the payment being capped at 70,000 - unless the Remuneration Committee agrees to set the cap aside (see authority to make decisions). Vice Chancellor s management group s authorisation is also required if the payment is, either: - up to 50,000; or - for an employee earning over 50,000 a year. If the employee and the University agree voluntary redundancy, a single payment will be made to the employee. This will bring together a payment based on the number of complete years service as set out in Appendix 2, payment in lieu of notice, outstanding annual leave payment and any other contractual payment which the employee may be entitled to. The first 30,000 of any redundancy pay and pay in lieu of notice is payable tax-free. Technically, redundancy (even voluntary redundancy) is a dismissal, and senior managers should consult HR about drawing up a compromise agreement. For voluntary severance The amount, which might be paid, is capped at 26 weeks pay or 37,500 whichever is the least. If the employee and the University agree voluntary severance, the sum offered will represent the full amount payable to the employee. In addition the employee will receive payments for outstanding annual leave. The employee s contract will end by mutual agreement and thus there is no right to redundancy pay or pay in lieu of notice. All payments will therefore be taxable. Definition of senior manager In this policy, a senior manager is: Anyone on the: VCEG CMT & Deans Page 10 of 11
11 Appendix 5 University of Bedfordshire Options Form Name: Post: Please provide the following details: a) An estimate of the severance scheme benefits b) Please arrange an appointment to discuss voluntary redeployment Signed: Date: Please return this form to Human Resources department by xxxxxx Received by Human Resources: Signed: Date Estimate Sent: Signed: Date Page 11 of 11
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