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So long, and thanks: compensation for loss of office

David Kernohan uses OfS data to take a look at the seldom-discussed world of compensation for loss of office.
This article is more than 4 years old

David Kernohan is Deputy Editor of Wonkhe

Staff leave university employment for all kinds of reasons and in all kinds of circumstances. These days the card passed around the office and the oddly depressing night out has been joined by another tradition – the financial settlement from your old employer.

Last year a little over 8,500 staff members at all levels saw the end of their employment associated with some measure of compensation. According to data from the Office for Students the cost of these payments to the sector totalled an astonishing £150m, up from £113m the previous year.

The data published by OfS does not differentiate between payments associated with a settlement and other end-of-employment payments. The guidance states:

Compensation for loss of office refers to circumstances in which an individual has left the provider’s employment and this has associated with it some form of compensation, whether this is a cash payment (or equivalent) or non-cash benefit. This may be associated with a settlement agreement, but not necessarily in all cases. This applies to all instances of loss of office, including where it occurs at the end of a fixed-term contract.

Also, the way the data is presented also does not allow us to distinguish between one large payment and a lot of small payments on the one hand, and a lot of medium sized payments on the other. I have my suspicions about the quality of the data too, as we shall see.

What happens?

People depart from university jobs for all kinds of reasons. Sometimes their employer may be at least partially culpable, and will feel the need to compensate the member of staff in question.

This can go one of three ways:

A redundancy payment will be linked to a programme of voluntary or involuntary job losses, which the provider may have negotiated with the trade unions. Here the payment will be a benefit of accepting the package, a benefit which doesn’t quite balance the loss of a job. The sums involved will usually be clearly signposted, and again may well have been negotiated. This has been an increasingly common experience in higher education and everything that can be predicted about the near future suggests there may be more to come.

A contractual payment is generally found when long serving staff, or a fixed-term contract researcher, leaves an institution. The method for calculating the payment would be set out in a contract of employment, hence the name.

A settlement payment is usually a far more individual affair. Issues in the workplace may be difficult to resolve as there are problems on both sides. A workplace injury (including a mental health problem) may have been developed due to poor working conditions. In some circumstances, it may be difficult to imagine a scenario where an employee could go on working for an employer, but equally difficult to imagine a straight ahead sacking without serious legal issues down the line.

A settlement payment forms a part of a wider settlement agreement, which includes clauses waiving the right of the employer to make other claims. I have heard of other clauses, such as restrictions on immediate employment elsewhere, or an agreement not to publicly denigrate the employer (the infamous “gagging clause”), but the primary purpose of the settlement is a settlement of actual or potential claims against the employer.

One common effect is that contact between an individual and their former colleagues is prohibited while the settlement process is in operation. If you have ever had an email forbidding you to speak to or contact a colleague, who later leaves, this is probably why. This can be a hugely stressful time for someone going through the process, and this seeming lack of support from colleagues can be a hugely painful experience.

Usage varies from institution to institution – there are some providers known in the sector as having a propensity to use such agreements in all or most cases. Others may only reach for them as a last resort. An investigation in People Management made freedom of information requests to a small number of Russell Group university and found that settlement usage was widespread.

The numbers

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This is the data we have from OfS. The quality is scrappy to say the least. The data combines information on each of the three types of payment above, and do please recall the volume issue. If I’m honest, when you find an institution that apparently paid £41,000 to no staff in 2017-18 you do lose heart a little. Several institutions that have announced redundancy programmes in each year do not appear to have registered them in this data.

Filters allow you to chose your year of interest and take a look at splits by provider group and region. The circles refer to the amount of money paid out (left axis), the lines to the number of staff FTE involved (right axis).

Many of the higher values in both categories can be attributed to programmes of redundancies in the year in question. Searching online for the university plus the word “redundancies” and the year in question can usually yield results. It would be fascinating to see national data on redundancies, but it is difficult to track down results rather than announcements.

It would be even more satisfying to come back to this data in a couple of years when the quality issues have been ironed out. Whereas the principle of publishing dubious quality data in order to see it improve in future iterations is one to be applauded, it can be painful in the early years.

The case for settlements

Your head of HR would argue that perhaps it is more the institutions that show no evidence of compensating people for loss of office that we should be concerned about. Aside from the humanity of ensuring a drastic loss of income for a former staff member is not the huge problem it could be in the short term, institutions also have a duty to manage risk. Former employees bringing employment law claims can be an expensive and time consuming business.

In a more litigious culture it feels likely that we will see employers taking greater steps to compensate those leaving employment earlier in the process. For some institutions this happens by default, while others may offer such deals to those leaving in certain circumstances or from certain roles. And it’s not just for vice chancellors any more, not by a long way.

In practice, anyone offered a settlement package should (and indeed, is required to) seek legal advice from their trade union or an independent employment lawyer. If done well, such packages can benefit the individual involved, and help the institution too. Though there is bad practice out there, most of the time it is just an institution trying to doing the right thing in difficult circumstances. We may argue about the use of public funds, especially in some of the higher profile senior cases – but we can also see a lot of good being done for people in difficult situations.

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