HM Treasury guidance on special severance payments

HM Treasury issued guidance on special severance payments on 27 May 2021. The guidance sets out the government’s position on use of these payments, ensuring that they represent value for money and are used when there is a clear justification for doing so.

The guidance confirms the criteria that employers should consider before making a special severance payment, explains the control process for special severance payments and sets out the transparency requirements for them.

The following payments are examples which would likely form special severance payments:

• any payments reached under a settlement agreement
• any special leave, such as gardening leave
• compensation in lieu of notice (CILON).

The guidance provides detailed provisions for the approval process at chapter three. This includes:

• securing HM Treasury approval before any offers are made, either in writing or verbally.
• securing Ministerial approval for any exit package, which includes a Special Severance Payment, which is at or above £100,000 and/or where the individual earns over £150,000.

Any payments not considered to be compliant with the approvals process may be considered a breach of the controls (detailed further in chapter five) and may result in sanctions issued by HM Treasury on the organisation, or on the sponsoring department.

The guidance is available in full on Gov.uk