Bounteous Bye Bye from the BoE: Former BoE staff given generous settlement payments

August 19, 2020

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2 min read

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What's going on here?

According to recent data, staff departing from the Bank of England (BoE) received £3m in “golden goodbyes” in 15 months, which are settlement payments offered to an employee as compensation for dismissal or compulsory redundancy.

What does this mean?

The Guardian newspaper released data collected from the Bank of England revealing that the 2019 jump in settlement payments occurred at the same time as a host of senior staff in the BoE’s information security team left. Indeed, £970,000 was given out to former staff in 2018, compared to £2.3m in 2019. The BoE affirmed that none of the former security staff which left in 2019 received more than £250,000, but it simultaneously refused to divulge neither the number of former staff who received “golden goodbyes”, nor the size of the payments. A spokeswoman for the financial institution has alleged that  only a few settlement agreements were related to the restructuring of the BoE’s security branch before the security breach occurred. 

The Bank of England isn’t the only institution which has come under scrutiny. “Golden goodbyes” for civil servants have recently been subject to fierce criticism: last month, Prime Minister Boris Johnson received severe backlash for authorising £248,000 in compensation to his outgoing cabinet secretary Sir Mark Sedwill.

What's the big picture effect?

The exorbitant sum of money which has been spent by the Bank of England, specifically shown by the 2019 surge, points to the arguably over-generous settlement payments which are handed out to staff upon their departure.

Settlement agreements are a means to set out the definite terms of an employee’s departure: the employer commits to paying the employee a sum, against which the employee waives his/her rights to bring any claims against the employer. These can also be called “golden handshakes”, a stipulation in an employment agreement which states that the employer will provide a significant severance package if the employee loses their job. 

As the UK enters a coronavirus-generated recession, it is up for debate whether settlement payments are justifiable or even legitimate, when resources are needed more than ever to save institutions and companies from bankruptcy. With interest rates being at an all-time low of 0.1%, and the Bank of England having developed economic stimulus worth hundreds of billions of pounds, lavish leaving packages may not be the priority to save the UK economy. 

Nonetheless, the law surrounding settlement payments is changing: as of April 6 2020, the government amended section 10 of the Social Security Contributions and Benefits Act 1992 to increase its tax take from employment termination payments by requiring employers to pay National Insurance Contributions on payments surpassing £30,000.Additional taxation and the squeezing of belts in anticipation of the recession’s effects mean settlement payments may not be so fanciful anymore.

Report written by Anaïs Itani

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