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					                                                                    Agenda Item No.
HERTFORDSHIRE COUNTY COUNCIL

POLICY & RESOURCES CABINET PANEL
THURSDAY 15 OCTOBER 2009 AT 2.00P.M.                                     3
AGE DISCRIMINATION – CHANGES TO REDUNDANCY PAY POLICY

Report of the Director of Resources and Performance

Author:              Louise Tibbert             (Tel: 01992 556653)

Executive Member: David Lloyd, Resources & Economic Well-Being


1.     Purpose of Report

1.1    To propose changes to the current redundancy pay policy.

2.     Summary

2.1    The existing redundancy pay scheme was last reviewed in 2007 and retained
       two levels or redundancy pay i.e. up to 66 weeks pay for under age 55s and
       up to 30 weeks’ pay for over age 55s.

2.2    The County Council is likely to be vulnerable to claims for age discrimination
       if the differential payments are maintained.

2.3    The County Council is expecting that workforce downsizing will result in a
       significant increase in redundancies from 2010/11 and needs to address the
       age discrimination risks, as well as minimise the future costs of redundancy
       payments.

2.4    The report proposes that a single scheme, using the statutory calculator and
       statutory maximum of up to 30 weeks pay, be implemented from 1 December
       2009 for all redundancy payments regardless of age.

3.     Recommendations

3.1    The Panel is asked to recommend to Cabinet that they endorse the proposal
       outlined at Option 2 (Section 6.2) of the report, a move to a single pay
       scheme of up to 30 weeks pay based on the statutory calculator, regardless
       of age.




e19ebb7d-7fff-4a36-abdc-720817aad5c0.doc                                                1
4.     Background

4.1    The Council implemented its current policy on 1 April 2007 as part of a wider
       review of associated local government pension scheme discretions, to
       comply with changes to age legislation. This was agreed by Cabinet in
       February 2007. This policy applies to all staff, including teachers and
       uniformed Fire Service staff.

4.2    Whilst some changes were made in 2007 to the pension scheme discretions
       (e.g. pension enhancement via added years was removed) the redundancy
       pay elements remained unchanged. It was agreed to monitor the number of
       cases leaving via redundancy and early retirement. To date emphasis has
       been placed on vacancy management and redeployment to minimise costs
       for the council, including those associated with early retirement and pension
       scheme ‘strain’.

4.3    The number of people leaving Hertfordshire County Council via redundancy
       remains relatively low, but is likely to increase significantly into 2010/2011 if
       10-20% reductions to the County Council’s headcount are required. The
       increase in redundancies and associated costs, together with recent legal
       advice about the potential for discrimination (on the grounds of age) within
       the County Council’s redundancy pay policy mean that a review is required
       urgently.

                                                                                  2007/8              2008/9
        Schools – Redundancy                                                        19                 102
        Schools – Early Retirement (no redundancy pay)                             125                 185
        Non Schools - redundancy                                                    40                  27
        Non schools – Early Retirement (no redundancy pay)                         127                 115

5.     Current County Council Policy

5.1    The issue for the County Council is that is pays significantly above the UK
       statutory maximum of up to 30 weeks for staff made redundant under the age
       of 50/55. The current County Council policy allows for up to 66 weeks pay
       based on a Hertfordshire County Council calculator (length of service and
       age) allowing 2.2 x weekly gross salary.
       Technical note:
       o   Local Govt. Pension scheme (LGPS) rules state that employees in the scheme before 31 March 2008 can
           access their pension on retirement/redundancy at age 50 – this is only protected to 31 March 2010 when the
           access age will increase to 55.
       o   Those employees who are members of the LGPS scheme on or after 1 April 2008, cannot access their pension
           until age 55.
       o   Redundancy compensation is based on an actual gross weekly pay using either the statutory calculator for
           those over 50/55 years or the HCC calculator for those under 50/55 years.
       o   Pension scheme entitlements are in addition to redundancy pay.


5.2    Staff over 50/55 years, regardless of whether they have joined one of the
       pension schemes (LGPS, Teachers, F&R and NHS (for a few nurses only),
       are capped at a maximum of 30 weeks pay based on the statutory calculator
       (length of service and age) to provide payment based on 1.1 x weekly gross
       salary).



e19ebb7d-7fff-4a36-abdc-720817aad5c0.doc                                                                            2
5.3    The 2007 rationale for maintaining the differential between under and over
       50/55s was pension scheme membership and entitlement to pension benefits
       over the age of 50/55 in addition of up to 30 weeks redundancy pay. This
       meant that paying the under 50/55s up to 66 weeks was a way of broadly
       equalising the overall payments. However, some over 50/55s have not joined
       a pension scheme but are also limited to a maximum of 30 weeks.

5.4    Legal advice is that there is a risk of challenge on age discrimination grounds.
       As yet, however, there has not been a successful Employment Tribunal claim
       specifically related to age discrimination and redundancy pay.

5.5    Many other authorities have also revised their schemes to provide only the
       statutory maximum of up to 30 weeks for all age groups using the statutory
       1.1 weeks pay calculator. This includes Essex and Cambridgeshire. A few
       councils, and the civil service, still pay up to a maximum of 104 weeks pay.

6.     Options

6.1    Option 1 – No Change

       o   Retain two different payment schemes for under and over 50/55s.
       o   There is a significant risk of legal challenge at some point. As yet there
           has not been a successful Employment Tribunal claim specifically related
           to age discrimination and redundancy pay. We are expecting case law to
           develop over time in this area.
       o   This option is not sustainable in relation to both costs due to predicted
           workforce downsizing and the likely risk of age discrimination claims from
           individuals and/or supported by the Trades Unions.

       o   This option is not recommended

6.2    Option 2 – Maximum of 30 Weeks Pay Regardless Of Age

       o   Provide only the statutory maximum redundancy payments of up to 30
           weeks regardless of age or membership of a pension scheme
       o   Use the statutory calculator based on 1.1 weeks pay for each year of
           service to a maximum of 30 weeks.
       o   This provides consistency of treatment and reduces costs for HCC.
       o   It significantly reduces the possibility of a challenge and possible
           associated costs under age discrimination.

       o   This is the preferred option.




e19ebb7d-7fff-4a36-abdc-720817aad5c0.doc                                              3
       Example 1: (Based on an annual salary of £20,000).

        Current policy: (Based on 2.2 weeks pay for each year of completed service up to a
        maximum of 66 weeks). The Employee aged 49 with 20 years local government service*
        would be entitled to 44 weeks pay = Total of £16,923.28.

        Proposed policy: Maximum of 30 weeks, based on the statutory calculator and on each
        year of completed service (up to 20 years). The Employee aged 49 with 20 years local
        government service* would be entitled to 24 weeks pay = Total of £9,230.88.

        Example 2: (Based on an annual salary of £20,000)

        Current policy. (Based on 2.2 weeks pay for each years of completed service up to a
        maximum of 66 weeks). The Employee aged 49 with 11 years local government service*
        would be entitled to 24.2 weeks pay = Total of £9,307.80.

        Proposed policy. Maximum of 30 weeks based on the statutory calculator and on each
        year of completed service (up to 20 years). The employee aged 49 with 11 years local
        government service* would be entitled to 15 weeks = Total of £5,769.30.


       * All continuous Local Government Service is counted for redundancy purposes

       1.   Average length of service – under 55s = 5.4 years (excluding under 1 year service)
       2.   Average pay – under 55s = £19,218 (non schools)


6.3    Option 3 – maximum of 66 weeks redundancy pay regardless of age

       o    Retain the Hertfordshire County Council calculator of 2.2.weeks for each
            year of service.
       o    This provides consistency of treatment
       o    Will significantly increase redundancy costs for the County Council
       o    It removes the possibility of a challenge under age discrimination.
       o    Difficult to defend during recession and increasing pressure on public
            sector budgets.
       o    Likely to be media interest at some point in ‘pay offs’ in the public sector
            and it would be helpful to take the County Council’s scheme down to the
            statutory level for all staff.

       o    This option is not recommended.

7.     Financial Implications

7.1    The financial implications of not making the changes to the policy as
       recommended in option 2 above are those associated with possible
       successful legal claims for age discrimination.

7.2    Option 2 also ensures that future redundancy costs are kept as low as
       possible and in line with the calculator for statutory redundancy payments.




e19ebb7d-7fff-4a36-abdc-720817aad5c0.doc                                                         4
8.     Implementation

8.1    The current County Council policy has not been formally agreed with the
       trade unions; details have, in the past, been the subject of consultation. This
       means that the policy is not part of a national or local collective agreement
       which is contractually binding. The 8 recognised trade unions will be
       consulted.

8.2    Timing for the start date of this new policy is proposed as 1 December 2009.
       Any redundancy processes that have started before that date will use the
       current policy i.e. only where the statutory Section 188 notice has been
       served to the Trade Unions(s) before 1 December 2009. (Please note due to
       some delays, the implementation date has been moved from 1 November to
       1 December to allow more time for discussion with the teaching unions).

8.3    Officers will report redundancy numbers and costs as part of regular
       workforce monitoring (e.g. via quarterly reports to Boards).

9.     Trade Unions

9.1    The 8 recognised trade unions will be consulted about the change to the
       scheme during October.



Background Information

Agenda and Minutes, Cabinet, February 2007 (Local Government Pension Scheme
Discretionary Compensation (Early Retirement of Employment) – Item 3 refers)




e19ebb7d-7fff-4a36-abdc-720817aad5c0.doc                                                 5

				
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