20.1 A Mutually Agreed Resignation Scheme (MARS) is a form of voluntary severance and has been developed with the aim of increasing the flexibility to organisations as they address periods of change and service redesign, in light of the financial circumstances in which they operate. The following set of principles have been developed and agreed by the NHS Staff Council in partnership to support the service in England in operating the scheme. Local partners are asked to use these principles in developing local schemes.
20.2 MAR schemes support employers by creating job vacancies which can be filled by redeployment of staff from other jobs or as a suitable alternative job for those facing redundancy.
20.3 The NHS Staff Council feels that the following good practice principles will support NHS employers in developing local MARS which will help to minimise the need for any future redundancies during periods of change and service redesign.
20.4 These guidelines refer to England only and further details of any arrangements in Scotland, Wales and Northern Ireland can be obtained from the respective Health Departments/Directorates.
20.5 Mutually Agreed Resignation (MAR) is a scheme under which an individual employee, in agreement with their employer, chooses to leave employment in return for a severance payment. MAR is not a redundancy1 or a voluntary redundancy, which would currently be covered by Section 16 or Section 16(a) (England). Severance payments should not be made where the circumstances entitle an employee to a contractual redundancy payment or redundancy benefits under the NHS Pension Scheme Regulations.
20.6 There may be a risk of a future redundancy claim if an employee is paid under MARS when their post is in fact redundant.
20.7 A MAR is viewed as being a voluntary resignation on the part of the individual employee, in return for a severance payment. As there may be significant financial implications for the employee, employers can support the decision making process by assisting individuals with understanding these implications. Employees may wish to augment this by seeking advice from a regulated financial advisor.
20.8 Some of the implications for employees to consider when resigning would include, for example:
- the possible loss of entitlements to welfare benefits
- mortgage protection insurance policies not covering resignations
- any possible impact on pensions
- lease car penalties
- multi-post contracts.
20.9 It would be for an employer working in partnership with local staff side to determine the eligibility criteria for a MARS.
20.10 Careful consideration will need to be given to the eligibility criteria and these should be drawn up in a way that closely link to the business case for the scheme. Criteria must not give rise to unlawful discrimination.
20.11 MARS is entirely voluntary from the employer’s and employee’s perspective and there is no legal obligation on the part of the employing NHS organisation to accept any individual application. Often a MAR is not an option, either because it does not suit individuals’ personal circumstances or because it is important to retain a member of staff in the organisation. However, in some situations a MAR may be a useful opportunity for both the organisation and the individual, dependant upon the time specific savings that can be achieved and the employee’s personal circumstances.
20.12 The final decision as to whether to accept an employee’s application would be at the employer’s discretion, depending upon their organisational needs, and there is no guarantee that an application to be considered under a MARS will be automatically approved. When making a decision regarding an application, an organisation will need to be able to demonstrate that there is a sound business case for the MAR and that it has acted fairly, in line with its own equal opportunities policy.
20.13 Application periods for a MARS should be time limited and not be an open ended exercise overlapping with a redundancy consultation. It would be expected that an organisation’s application process would incorporate the values of confidentiality as embodied in the relevant organisation’s polices.
20.14 It is important that an employee’s proposed leaving date will be subject to mutual agreement between the employer and employee.
20.15 MARS should not be seen as a substitute for addressing poor performance, disciplinary matters, unwelcome publicity or reputational damage. Where appropriate, poor performance and conduct issues should be addressed via the organisation’s relevant policies and procedures.
20.16 Employees who leave an employer under the MARS would not be re-employed under normal circumstances by the same employer, in the same or a different post, before a period of time has elapsed. This is to ensure that public monies are spent appropriately and due consideration is given to all the alternatives available to an organisation when assessing the business case for any application under a MARS.
20.17 An employee, who secures another job within the NHS within a short period of time, may be required to repay a proportion of their compensation to the employer that made the payment. If the job is at a lower salary then the repayment would be reduced accordingly. The settlement agreement should specify the requirements for repayment in such circumstances.
20.18 Any severance payment made will be offset against any subsequent payment made for the purposes of any future calculation of redundancy payments in subsequent employment, where the period of employment covered by the severance payment is taken into account in calculating the redundancy payment.
20.19 The employer is responsible for the costs associated with any severance payment agreed under a MARS.
20.20 When deciding on a MARS, the employer will need to have a clear financial rationale that can justify a severance payment using public monies. In line with current good practice, consideration will need to be given to whether an employer is able to demonstrate:
a) why the severance payment is in the public interest;
b) why it represents value for money;
c) how it represents the best use of public funds.
20.21 It is recommended that appropriate good practice corporate governance principles2 are in place and followed when undertaking the process of approving severance payments.
20.22 Any locally agreed MARS will require approval from HM Treasury and the appropriate oversight organisation for the purposes of MARS (NHS Improvement, NHS England or the Department of Health and Social Care).
20.23 Severance payments will require certification from the Accountable Officer stating:
a) the scheme is affordable and within control totals
b) there are no staff leaving under the scheme who should otherwise be managed under the organisation’s performance/capability procedures
c) the time limits applied to the scheme.
20.24 It is advised that any severance payment under the MAR scheme will be formalised by means of a settlement agreement. This would set out the financial and all other terms on which the employment relationship will end.
20.25 The NHS organisation will meet reasonable costs for the independent legal advice taken by an employee who signs a settlement agreement.
20.26 The payment rate must reflect value for money for the public sector with a clear rationale for sustainable cost savings (see paragraphs 20.19 to 20.23 - Financial Case). When determining payment rates employers should take into consideration the relative costs of alternatives to a MAR. The amount should be sufficiently attractive to incentivise applications for the scheme, taking into account the level at which the minimum rate is set. Payments will need to be consistent and transparent and reflect the needs and objectives of the organisation.
20.27 Taxation in regard to severance payments is complex. Changes as part of the Finance Act came in to force from 1 April 2018, and further changes come in to force from 1 April 2019. Professional advice on the individual circumstances of each case will need to be considered by both parties.
20.28 In line with good practice, any local MAR scheme will need to operate in line with the equal opportunities principles as set out in equality legislation.
20.29 No employee should receive less favourable treatment on the grounds of age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex or sexual orientation, or on the grounds of trade union membership.
20.30 Employers will need to undertake an equality assessment of their MAR scheme and put into place the appropriate monitoring, in line with their relevant policies, as developed in partnership with their local staff organisations.
The definition of redundancy given by Section 139 of the Employment Rights Act 1996 states:
"... an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is attributable wholly or mainly to:
- the fact that his employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed by him, or has ceased, or intends to cease, to carry on that business in the place where the employee was employed or
- the fact that the requirements of that business for employees to carry out work of a particular kind, or for employees to carry out work of a particular kind in the place where he was so employed, have ceased or diminished or are expected to cease or diminish."
2 For NHS employers in England:
Amendment number 39: NHS TCS Advisory Notice 01/2018