Human Resources Policy & Procedures. Early Retirement & Redundancy Payments

Transcription

1 Human Resources Policy & Procedures Early Retirement & Redundancy Payments February 2013

2 Reference No: 29.0 Date Last Updated: 26 th February 2013 Approved by: Eloh Agbahowe Date Approved: 26 th February 2013 Version No: 2.0 Review Date: 1 st October 2013 Document Owner: Jamieson Robbins Post Holder: Human Resources Consultant EIQA Assessed: N/A Purpose Provide a clear framework and guidance on the entitlements and payments for those employees subject to redundancy or early retirement. Related Policies Retirement and Pensions Change Management Redeployment Redundancy Who is governed by this policy All London Borough of Newham employees Executive Summary This policy sets out what payments/benefits employees may be entitled in circumstances where they leave their employment due to redundancy, early retirement and/or ill-health retirement. It also provides guidance on the benefit arrangements for employees who die whilst in service. Page 2 of 7

3 1 Voluntary Early Retirement at the Employee s request 1.1 This scheme only applies to employees who are members of the Local Government Pension Scheme. 1.2 Applications for Voluntary Early Retirement can only be made by employees who are over the age of 55. From 1 st April 2010 only those employees aged will be able to submit an application for Voluntary Early Retirement. 1.3 Voluntary Early Retirement benefits are granted on the basis of no cost to the Council. 1.4 Pension and lump sum benefits are payable immediately and based on salary and service at the date of retirement, without enhancements or added years. Benefits may be reduced depending on service and whether the 85 year rule applies. 1.5 Employees may also wish to consider Flexible Retirement options, full details of which can be found in the Council s Flexible Retirement Procedure. 2 Ill-Health Retirements 2.1 This benefit only applies to employees who are members of the Local Government Pension Scheme. 2.2 There are three tiers of Ill Health Retirement. Ill Health Retirement benefits are part of the National scheme and the Council has no remit to vary these. 2.3 The higher tier, with membership enhanced up to the age of 65, is payable where it is certified by the Council s Occupational Health Service that the employee is highly unlikely to return to gainful employment before age The second tier, with enhancement of 25% of membership to age 65, is payable where it is certified by the Council s Occupational Health Service that the employee has a reasonable prospect of returning to gainful employment before age The third tier, with no enhancement of membership but immediate payment of pension based on membership of the Local Government Pension Scheme to the date of ill health retirement, is payable where it is certified by the Council s Occupational Health Service that the employee is medically incapable of continuing employment in their current role and has been unable to find suitable alternative employment through the Council s redeployment procedure. It would also be expected that the employee could return to employment within a short period of time, in which case their pension would be suspended immediately upon their return to paid employment. 2.6 It is expected that protection will exist for employees who are aged 45 or more on 31 st March 2008, ensuring that they receive the greater of the enhancements under the updated or previous scheme. Page 3 of 7

4 3 Death in Service Benefits 3.1 This benefit only applies to employees who are contributing members of the Local Government Pension Scheme. 3.2 A Death in Service benefit equivalent to three times the final salary of a deceased employee will be payable at the discretion of the administering authority of the Local Government Pension Scheme to the employee's nominated beneficiary, his/her estate or any other relative or dependant. 4 Redundancy Payments 4.1 In accordance with the Employment Rights Act 1996, employees must have completed at least two years' continuous local government service or two years' continuous service with other specific bodies covered by The Redundancy Payments (Continuity of Employment in Local Government, etc) (Modification) Order 1999 in order to qualify for Redundancy benefits. 4.2 Employees with less than two years' continuous local government service or two years' continuous service with other specific bodies covered by The Redundancy Payments (Continuity of Employment in Local Government, etc) (Modification) Order 1999 are entitled to receive notice of termination in accordance with their contract of employment. They do not qualify for Redundancy Compensation. 5 Voluntary Redundancy 5.1 The Council is committed to creating as secure an employment environment as possible and will therefore endeavour to avoid compulsory redundancies wherever it can. However where redundancies are unavoidable the Council may seek volunteers who wish to be made redundant, thereby avoiding compulsory redundancies. 5.2 Voluntary redundancy is a scheme under which the Council may offer an agreed termination package to an employee whose employment is terminated on acceptance of voluntary terms. Full details of the Council s Voluntary Redundancy Scheme can be found in the Human Resources Procedure for Managing Change. 6 Redundancy Benefits (whether Voluntary or Compulsory) 6.1 Employees whose service is terminated on the grounds of either Voluntary or Compulsory Redundancy will be entitled to the following: an enhanced statutory redundancy payment ("Enhanced Statutory Redundancy"). 6.2 Enhanced Statutory Redundancy Pay The Council currently increases the minimum statutory redundancy payment by removing the weekly pay cap under the Employment Rights Act 1996 and basing the payment on the employee's actual weekly pay. Enhanced Statutory Redundancy is calculated by reference to the table published by the Department of Business Enterprise Page 4 of 7

5 and Regulatory Reform, according to age and length of service (Table 1). 7 Pension Benefits 7.1 Dependent upon an employee s age at the date of Redundancy they will be entitled to either; a deferred pension based on their period of membership of the LGPS, which would become payable at normal retirement age or for employees who are over age 55 an immediate pension based on their period of membership of the LGPS. There is no entitlement to added years of service and a Lump Sum Retiring Allowance based on LGPS service to and the employee may also elect to give up part of the pension earned from onwards for an additional lump sum. 8 Pension Abatement The Council will abate the pension payable because of re-employment where the pensioner could re-enter the LGPS and the pensioner s overall income upon commencement of re-employment by way of re-employed earnings and annual retirement benefits otherwise payable exceeds the level of pensionable earnings of the relevant former employment Page 5 of 7

6 Table 1 Ready Reckoner for calculating the number of weeks' pay due - if made redundant ON OR AFTER 1 OCTOBER Service (Years) Age ½ ½ ½ 2 2½ ½ 2 2½ ½ 2 2½ 3 3½ ½ 3 3½ 4 4½ ½ 4 4½ 5 5½ ½ 5 5½ 6 6½ ½ 6 6½ 7 7½ ½ 7 7½ 8 8½ ½ 8 8½ 9 9½ ½ 9 9½ 10 10½ ½ 10 10½ 11 11½ ½ 11 11½ 12 12½ ½ 12 12½ 13 13½ ½ 13 13½ 14 14½ ½ 14 14½ 15 15½ ½ 15 15½ 16 16½ ½ 16 16½ 17 17½ ½ 17 17½ ½ 18 18½ ½ ½ 42 2½ 3½ 4½ 5½ 6½ 7½ 8½ 9½ 10½ 11½ 12½ 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½ ½ 5½ 6½ 7½ 8½ 9½ 10½ 11½ 12½ 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½ 21½ ½ ½ 6 7½ 8½ 9½ 10½ 11½ 12½ 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½ 21½ 22½ ½ 6 7½ ½ 6 7½ 9 10½ 11½ 12½ 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½ 21½ 22½ 23½ ½ 6 7½ 9 10½ ½ 6 7½ 9 10½ 12 13½ 14½ 15½ 16½ 17½ 18½ 19½ 20½ 21½ 22½ 23½ 24½ ½ 6 7½ 9 10½ 12 13½ ½ 6 7½ 9 10½ 12 13½ 15 16½ 17½ 18½ 19½ 20½ 21½ 22½ 23½ 24½ 25½ ½ 6 7½ 9 10½ 12 13½ 15 16½ ½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 20½ 21½ 22½ 23½ 24½ 25½ 26½ ½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ ½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 23½ 24½ 25½ 26½ 27½ ½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ ½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 24 25½ 26½ 27½ 28½ ½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 24 25½ ½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 24 25½ 27 28½ 29½ ½ 6 7½ 9 10½ 12 13½ 15 16½ 18 19½ 21 22½ 24 25½ 27 28½ 30 Page 6 of 7

7 Table 2 Examples of Redundancy Benefits calculations. Employee A is 46 years old, has 12 years of service and earning an annual salary of 26,235 Enhanced Redundancy Pay = ( 26,235 / 365 x 7 days) x 14.5 weeks = 7, In addition Employee A would be entitled to deferred pension benefits, which would normally become payable at age 65. Employee B is 57 years old, has 24 years of service and earning an annual salary of 20,118 Enhanced Redundancy Pay = ( 20,118 / 365 x 7 days) x 28 weeks = 10, In addition, Employee B would be entitled to an immediate pension calculated on the basis of their LGPS service at and a lump sum retiring allowance based on LGPS service to (plus Employee B could elect to give up part of his pension earned from for an additional lump sum). Employee C is 39 years old, has 18 years of service and earning an annual salary of 75,591 Enhanced Redundancy Pay = ( 75,591 / 365 x 7 days) x 17.5 weeks = 25, In addition Employee C would be entitled to deferred pension benefits, which would normally become payable at age 65. Page 7 of 7