Local government redundancy: council pay, LGPS and settlement agreements

Do councils pay more than statutory redundancy pay?

Often, yes. Every council must publish its own discretionary compensation policy setting out whether it enhances the statutory minimum, up to a regulatory ceiling of 104 weeks' pay, and whether a week's pay is based on your actual salary or the lower statutory cap. Policies differ significantly between authorities.

Council and local authority staff face redundancy when services are restructured, outsourced or reduced due to budget pressures, and terms can vary significantly between authorities because each council sets its own discretionary compensation policy on top of the statutory scheme. Many councils calculate statutory redundancy pay using an employee's actual weekly pay rather than applying the statutory weekly cap, which increases the payment for higher earners. Staff in the Local Government Pension Scheme aged 55 or over may also be entitled to early, unreduced access to their pension on redundancy. Settlement agreements are used across local government both for agreed exits during restructuring and to resolve individual employment disputes.

Local government redundancy pay: Local Government (LGPS) redundancy and the discretionary compensation policy

Local authorities operate under their own discretionary compensation policy, made under local government regulations, setting out enhancements to statutory redundancy pay and other exit terms. A common feature is calculating a week's pay using actual salary rather than the statutory cap, so higher earners receive more than the standard formula suggests. Employees in the Local Government Pension Scheme aged 55 or over may also qualify for immediate, unreduced pension payment on redundancy, a benefit separate from the redundancy payment itself.

The 2006 Regulations: what every council must publish

The Local Government (Early Termination of Employment) (Discretionary Compensation) (England and Wales) Regulations 2006 require each employing council to decide, and publish, its own policy on discretionary redundancy compensation (regulation 7), having regard to public confidence and affordability. Regulation 5 removes the statutory week's-pay cap from the underlying redundancy calculation; regulation 6 sets the discretionary compensation ceiling at 104 weeks' pay, offset by anything already paid under regulation 5 and by any statutory redundancy payment.

Because the Regulations set a ceiling, not a fixed figure, the actual multiplier a council awards is a matter of local policy, not national law, and can change when a council reviews its policy. See the council redundancy policy dataset for what we have sourced and verified for individual councils.

Maintained-school teachers

Teachers and support staff employed in maintained schools are, for redundancy compensation purposes, covered by the same local authority discretionary policy as other council employees (the school is not a separate employer for this purpose). The council dataset below therefore also serves as a lookup for maintained-school staff checking their likely enhancement.

The Local Government Pension Scheme boundary

LGPS members aged 55 or over who are dismissed for redundancy are entitled to (and must take) immediate payment of their pension, which can be a substantial benefit alongside the redundancy payment itself. This is a pension question, not a legal one, and the exact position depends on your LGPS fund and membership record. We describe the boundary here; we do not advise on it. Speak to your LGPS fund and, for a personal recommendation, an FCA-regulated financial adviser.

Settlement agreements in local government

Settlement agreements are common in local government redundancy exercises, particularly where a council wants to agree enhanced terms, confirm pension implications, or resolve a related grievance alongside the redundancy. Because discretionary policies and pension strain costs vary by authority, the value of an offer can be hard to assess without specialist review. As with any settlement agreement, it is only binding once an employee has received independent legal advice, which the council will normally pay for.

Local government redundancy: frequently asked questions

Situations that often arise in local government

• Redundancy consultation
• Voluntary redundancy
• Pregnant or on maternity leave
• Over 50: pension interactions