42

To: PERSONNEL SERVICES COMMITTEE

From: HEAD OF PERSONNEL SERVICES

Date: 05 March 1998 Ref: ABIMB

REPORT

Subject: VOLUNTARY SEVERANCE

Introduction

The purpose of this Report is to update Committee on the current Voluntary Severance exercise. Committee will recall that as a result of budget considerations, the formal notification of possible job loss was intimated to the Government Department and to the Trade Unions on 29 December 1997 with an intimation to employees on 8 January 1998 of the availability of the Council’s provisions for voluntary severanceiearly retiral.

The Scheme provided for employees (a) to express interest and (b) to pursue formal applications once the estimates of entitlements had been calculated for employees, including superannuation benefits - where these applied. The assessment of applications and the effect on service provision has been integral to the programme. To date, a total of 768 employees expressed interest in the Scheme and entitlement calculations undertaken for such staff.

The programme to submit supported applications has commenced, with the first of the Committee consideration of applications scheduled for 4 March 1998, through the Early Retirement Sub-Committee, as recommended by Committee at their last meeting. Consideration of further applications will continue by means of the Early Retirement Sub-Committee on an as and when required basis.

A summary of expression of interest is given at Appendix 1 although not all of these are expected to result in progression to the second stage viz. formal applications.

The guidance notes issued to employees are shown at Appendix 2, illustratmg the entitlements in accordance with the statutory and superannuation regulations and advising on tax, holiday pay, pay in lieu of notice and car loans implications.

Recommendation

That Committee note the terms of this Report.

Head of Personnel Services

VOLSEV DOC

43

Total Summary of Expressions of Interest by Department to 27/02/98

27-Feb-98

Department Manual Teacher Staff Totals O/O of total

Administration 2 2 0.26%

135 17.58%

1 18 19 2.47% Education

199 19 218 28.39% Environmental Services

13 13 1.69% Finance Housing 3 3 0.39%

169 54 223 29.04% Leisure Services

17 17 2.21% Planning and Development

11 127 138 17.97% Social Work

494 1 273 768 100.00%

Construction Services 115 20

250

200

150

100

50

0

Redundancy exercise -summary breakdown of Manual 8 Staff employees

Manual

0 Staff

0 Teacher

.44

VOLLI'TARY SEVEWYCE EMPLOYEE GUID.4KCE NOTES

COSTENTS

Section

1. Introduction

-. 3 Benefits

3.

3 . Financial Option Sheet

5. + Employees aged under 50

6. Employees aged over 50

1. Pension Scheme

8. Income Tau,

9. Payment of Benefits

10.

11.

12. Holiday Pay

Appendix 1 Table 1

Appendix 2 Tariff A

Appendix 3 Tariff B

Employees who are not hlembers of the Pension Fund

-

Car Loans and Car Leases

Payment in Lieu of Notice

Page

1

1

1

2-3

3-4

4-6

7-5

8

8

8

8

8

45

. 1 .o

2.0

3.0

INTRODUCTION

This document is issued for guidance only and to assist you in your decision on whether or not to formally apply for voluntary severance. Specific queries should be directed to:

Kate Con-m Principal Personnel Officer 01698302417 Elda Ti’heeler Senior Personnel Ofilcer 01698 302593 h h e Johnston Personnel Officer 01698302335 FionaHansom Personnel Officer 0169S302335

BENEFITS

The financial benefits you nil1 receive if you leave the employment of the Council on voluntary severance will depend upon your age, senice, remuneration and membership of the Local Government Superannuation Scheme (referred to in t h s document as the ‘Pension Scheme‘).

For ease of reference. the pa1;ments available under the various legslation have been summarised into options and you will be provided uith details of the options applicable to you in a Financial Options Sheet. Table 1> attached at Appendix 1, shows summary benefits available under each option and for each age group of employee. Only one option may be chosen.

h4ore derails of the benefits payable under each option. and rhe methods of calculation, are detailed below at sections 5 and 6 and Tariffs A and B. attached at Appendices 2 and 3 can be used 2s ready reckoners to confirm entitlements.

<

EhIPLOYEES MIHO ARE NOT RIERIBERS OF THE PENSION FUND

If you are not a member of the Pension Scheme you v-ill. clearly. not be entitled to pension benefits. However, you will be entitled to the following:-

3.1 Employees under 50 less than 2 years’ senice - years of ase \si&:-

more rhan 2 years‘ service

3.2 Employees over 50 less than 2 years’ senice - years of age with:-

more than 2 years’ service

1

NO BENEFITS AV.AILABLE

OPTION B Ths will comprise a compensation paqment only (see 5.1 below-).

OPTION B Ths will comprise a compensation payment of 5 weeks’ pay only (see 6.2 below).

OPTION A This will cornprise a statutory redundancy payment only (see 6.1 below).

Revised: 13 Janua.. 1998

46

4.0 .

FM.LUVCI;IL OPTIONS SHEET

You will be issued with a Financial Options Sheet whch details the options available to you.

If you are under 50 only Option B will be applicable. If you are aged over 50 you may have options AB, or C. depending upon your individual circumstances.

The Financial Options Sheet nil1 c o n f m your a,oe and senice at the proposed date of leaving. The benefis to which >-ou are entitled are summarised. with the various frnancial amounts payable contained ivithin an outlined box.

As an esample. an employee aged 52 who earns €126.S9 per week and has 16 years’ continuous sen-ice wirhin local government and has been a member of the Pension Scheme for 7 years would receive the followin=. provisional benefits under Option A .

Redundancv Pavment

Weekly pay (1): €126.S9

Continuous senice: 16

Calculator ( 2 ) : 21.5

Statutor). redundancy pa!ment ( 1x2.)

Annual Pension

Basic pension (1): f5SS.53

Added years payment(2): €550.94

lflllj9.36j Total pension pa1;ment @er m u m > ( 1-2):

Pension Lump Sum Pavment:

Basic lump sum (1): € 1,765.55

Added years payment ( 2 ) : €1,652.83

Total lump sum pa]iment (1+2):

No. added years: 3.122

In this example, you would receiye a statutory redundancy payment of €2.728.13 from the Council and €3:418.38 in a one off lump sum payment from the Pension Fund. Thereafter. €1.139.46 would be paid as an annual pension at approximately €94.96 per month.

The calculator is obtained from Tariff A (see 6.1.4 below). Your weekly p2y is niultiplied by the calculator to determine the statutoq- redundancy paqment to which you are entitled - f2,728.14 in this example. Your pension benefits would be enhanced by 3 years and 121 days.

Because of the different definitions of seMce, the senice used to calculate your redundancy!compensauon benefits may be different fiom that used to calculate your pension benefits. With the exception of the number of added years. the Financial Options Sheet %ill not detail your pensionable sercice. Similarly, the pay figure used to calculate your pension benefits will be different to that used as weekly pay to calculate your redundancy or compensation palment.

2 Re\ised: 23 January 199s

47

1

Detailed workings of your pension benefits, including pensionable service, will be attached to your Financial Options Sheet on papx headed “Notification of Benefits” see 3.0 above.

Options B and C are illustrated on the Financial Options Sheet in the same way as this example however. Option B u i l l contain no pension benefits and Option C no compensation or redundancy payment.

5.0 ERIPLOI’EES AGED UhmER 50

5.1 OPTIONB - 5.1.1 Leg‘slatiorz

The Local Government (Compensation for Redundancy) Regulations 1993

c

5.1.1 Eligibilig You \vi11 be gi\ren this option if you are aged between 18 and 39 and have at least 2 years’ sercice (see 5.1.5 below).

5.1.3 Benefits You will be entitled to a compensation payment only (whch will include any statutop redundancy payment to whch you are entitled).

The benefits are expressed as a prescribed number of weeks pay, dependant upon your age and semice. -4 ready reckoner at TARIFF B shows the number of weeks pay that are payable based, on completed years of senice. Pan years do not count. To confirm t h e number of weeks pay. to which you are entitled. line up the column of completed years of senice w i t h your age at your last bhhday. This mill be multiplied by your w-eekly pay to calculate your compensation pajment.

5.1.4 What Counts as a W e e h Pay If you are a member of the Pension Scheme, this is the pay on which you pay pension contributions. If you are not a member of the Pension Scheme, this is the pay on which pension conmbutions would be paid if you were a member of the Scheme. In general. this will be your contractual pay. However, ‘‘Detriment” payments are not pensionable and will, therefore, not be included in the calculation of a weeks pay under this option.

For all employees. the pensionable pay, paid over the 365 day period up to the date on ivhich you leave the Council. is diLided by 52 to arrive at a weekly amount.

Pensionable Pay is deemed to be:-

basic wageJsalary, and

contractual elements e.g. bonus, contractual overtime, shift allowance, weekend allowance etc. Non conuactual palments %ill not be included, such as car allowance non contractual overtime (no matter how regular) excess uavel expenses, higher duties pa1;m ent .

5.1.5 What Counts as Service For members of the Pension Scheme all superannuable service which counts towards calculating pension benefits under the Pension Scheme, including that transferred in from another scheme.

For all other employees to be continuous if any break is no longer than one month and one day.

continuous local government sercice. Senice is considered

For part time employees service is the actual len-mh of time the individual has been employed. e.g. a part timer w o r h g 17.5 hours per week for 5 years xi11 hwre reckonable

3 Rexlised: 23 January 1998

service of 5 years. ‘The pay to be used for calculation of redundancy is the actual pay received. Only completed years of service can be used in calculating compensation payments. .

5.1.6 Pension If you leave the Council under this option on the ground of Redundancy you uill have no entitlemenr to receive pension benefits. r2ny benefits you have accumulated by way of contributions to the Pension Scheme Kill be deferred. usually until you are aged 60 (see 3.5 above).

6.0 ERIPLOE’EES -4GED O\-ER 50

Employees aged 50 and above may have a choice of options depending upon service and membership of the Pension Scheme.

6.1 OPTIONA 6.1 . 1 L e,is(attion

The Emplo>ment Rights Act 1996

The Local Government (Compensation for Premature Retirement) (Scotland) Regulations 1979

6.1 .? Eligibilify You will be given this option if you are aged 50 or over and have more than 2 years’ continuous senice (see 6 1.6 below-)

6.1.3 Benefits You uill receive a statutory redundancy payment and, if you have been a member of the Pension Scheme for more than 2 years’ you \Sill have your pension benefits paid to you. If you have been a member of the Pension Scheme for more than 5 years your pension benefits will be enhanced by up to 6’13 years.

6.1.1 Slatuloty Redlrrtdartcy Payineiri You will be entitled to a prescribed number of weeks pay dependant upon you age and senice. A ready reckoner at TARIFF A shows the number of weeks pay that are payable based on ccmpleted years of senice. Pan years do not count. To confirm the number of weeks pay, to which you are entitled, line up the column of completed years of sen ice ~4th your age at your last birthday. This will be multiplied by your weekly pay to calculate your compensation payment.

6.1.5 What Couirts QS Q V e e h Pay For manual and craft empIoyees, this is the gross weekly contractual wage at the date of leaving the Council. For .4F‘T&C staff and Chief Officials, it is the gross annual contractual salary at the date o f leaving dilided by 365 and multiplied by 7.

Contractual pay is deemed to be:-

basic wageisalary, and

conaactual elements e . g bonus, contractual overtime, shift allowance, weekend allowance etc. s o n contractual payments will not be included, such as car allowance non conmactual overtime (no matter how regular) excess txavel expenses, higher duties pa1;ment.

4 Revised: 23 January 199s

49

6.1.6 What Couiits as Service This is continuous local government senice as defined in the Redundancy Payments (Local Government) (Modification) Orders. Continuity of senice is normally broken if there is a break of 7 days or more.

Only completed years of service can be used in calculating redundancy payments.

6.1.7 Peiision

follo\vs: - Employees who are members of the Pension Scheme Rill be entitled 10 benefits as

Membership of between 2 and 5 years You will receive immediate payment of pension benefits. The benefits will not be enhanced.

hdembership of more than 5 years

6.2 OPTIONB 6.2.1

6.2.2

6.2.3

6.2.3

You will receive immediate paynent of your pension benefits which will be enhanced by up to 6 2l3rd years.

L e,aisialio 11

The Local Government (Compensation for Redundancy) Regulations 1994

EiigibiliQ You w d l be $ - e n this option if you are aged 50 or over and have less than 2 years’ senice (see 6.2.5 below).

Ben efirs You will be entitled to a compensation payment of 5 weeks’ pay only as detailed in Tariff B. The Tariff shows the number of weeks pay that is payable based on completed years of senice. Part years do not count.

Ic’lzaz Coiiiits as “Weekly Pay” If you are a member of the Pension Scheme, this is the pay on whch you pay pension contributions. If you are not a member of the Pension Scheme, this is the pay on which pension contributions would be paid if you were a member of the Scheme. In general, this will be your contractual pay. However, ‘‘Deniment” payments are not pensionable and will. therefore, not be included in the calculation of a weeks pay under this option.

For all employees, the pensionable pay, paid over the 365 day period up to the date on whch you leave the Council, is divided by 52 to arrive at a weekly amount.

Pensionable Pay is deemed to be:-

basic wage/sa lq , and

contractual elements e.g. bonus, contractual overtime, shift allowance, weekend allowance etc. Non contractual payments will not be included, such as car allowance non contractual overtime (no matter how regular) excess travel expenses, higher duties p a>m ent .

5

* 6.2.5 Wfzar Cozuzfs as Service

For members of t he Pension Scheme all superannuable senice which counts towards calculating pension benefits under the Pension Scheme? including that in from another scheme.

transferred

For all other employees continuous local sovemment senice. SenTice is considered to be continuous if any break is no longer than one month and one day.

For par t time employees senlice is the actual length of t h e the individual has been

senice of 5 years. The pal.’ to be used for caIcuIation of compensation is rhe actual pay received.

- employed. e.g. a pan h e r w o r b g 17.5 hours per week for 5 years will have reckonable

Only completed years of service can be used in calculating compensation payments.

6.2.6 Pension Because you have less than 2 pears’ superannuable senice you will have no entitlement to pension benefits. If you are a member of the Pension Scheme. you Isill ~ i m p l ) ~ receive a refund of any pension contributions you have made.

6.3 OPTION c 6.3.1 Legdation

The Local Government (Compensation for Premature Retirement) (Scotland) Regulations 1979

-,

6.3.2 Elig*bility You will be $ven this option if you are aged 50 or over and have been a member of the Pension Scheme for at least 5 years.

6.3.3 Benefits In choosing this option, you will waive any entitlement you have to a statutory redundancy payment in favour of maximising pension benefits by enhancing your pensionable senice by up to 10 added years. Please note however that you cannot receive an enhancement to your superannuable ser$ice which:

is greater than 10 years is greater than the period of reckonable sercice you have actually accumulated is greater than the period of time remaining until your 65th birthday when added to your actual reckonable service, exceeds 30 years

6.3.3 Conditions This option is different kom Options .4 and B because:-

a) your employment will not be terminated by the Council. Rather, it will end by mutual agreement between you and the Council.

b) because your employnent is not being terminated. you will have no entitlement to notice. and

c) in maximising your retirement benefits, you waive any entitlement you may have orhemrise had to a redundancy payment.

6 Revised: 23 Janua? 1998

51

7.0 PENSION SCHEME

If you are aged 50 or over and leave the employment of the Council under the V o l u n t q Severance Scheme, you will qual i f i for immediate payment of your pension and tax free lump sum prolided you have at least 2 years’ Qualifiing Service. No reduction is applied for early payment.

Clearly. pension benefits will only be available if you are a member of the Pension Scheme and pay conmbutions fiom your wage or salary.

Benefits available under Option C are entirely dependant upon membership of the Pension Fund. Accordingly, if you have not been a member of the Pension Scheme for at least 5 years. this option vi11 not be available to you.

-

. b y pension benefits to which you are entitled are summarised in the Financial Options Sheet with which you will be issued. The actual detailed w o r h g s of your pecsion entitlements will also be enclosed although the layout and terminology may be less easily understood. These pension documents are headed up ‘5Votification of Benefits” and contah very detailed informanon and complex calculations. They are probided only as supplementary information and the summary of benefits to whch you are actually entitled are contained in the “Financial Options Sheet”. The Pension Wotification of Benefits Sheets” contain certain terms xh.h which you may not be familiar, such as:-

7.7 Qualifiiiig Seisice This is senice which is taken into account in deciding whether or not you are entirled to benefits born the Scheme. It is normally the actual calendar len-g.h of service in which you have been a member of the Pension Scheme (or a prelious pension arrangement if you transfened-in your rights), but it can also include senice when you were not a scheme member e.g. part-time employees with senice prior to 1/4/86. Qualifqing Senice should not be confused with Reckonable Service which is the sen-ice eventually used in the calculation of your retirement benefits.

z

7.2 Reckoiiable Service This is the period of service used for the calculation of your benefits. It is usually the period during which you have paid contributions, plus any additional service transferred in from a previous pension scheme, or “bought” by means of e m a contributions.

7.3 Peiisioii Benefits The Pension Scheme provides retirement benefits consisting of an Annual Pension and a Tax Free Lump Sum. These are calculated as fol1ou-s:-

Annual Pension 1/80th x Final Pensionable Pay x Reckonable Service

Tax Free Lump Sum 3/80 x Final Pensionable Pay x Reckonable Service

although certain deductions may apply in certain circumstances.

7.1 Eiihaiiced Benefits If you have at least 5 years sercice, the Council will award you additional senice whch will be used in t h e calculation of your benefits.

The maximum additional service which can be granted is the shortest of the follovcing periods:

IOyears actual Reckonable Service service to age 65, and sen ice to achieve a total of 40 years

Revised: 23 Januav 1998

7.5 Deferred Benefits If you have more than 2 years' reckonable senice in the Pension Scheme but are not eligible for payment of pension benefits at the date of leaving (for example because you are under 50 years of age) you do not lose your entitlement to these benefits. The benefits will be deferred unul your 60th bmhday, provided you are able to accrue 25 years of service in total, adding together the actual service accrued to date of termination and the intervening period till age 60. If 25 years cannot be counted, your benefits will be held back until 75 years can be made up or age 65 occurs. whichever is the earlier.

'

-

If the total of the redundancy payment or compensation payment and pension added years lump sum amountj to more than f30.000, the excess of f30.000 is taxable.

9.0 P.4ETlIENT OF BEhZFITS

. b y statutory redundancy payment or compensation pa]iment to which you are entitled will be paid to you on or around the date you leave the Council.

.by Tension benefits nil1 be processed by the Pension Fund in Glasgow and you \vi11 receive payment no earlier than 6 w e e k after your leaving date.

10.0 CAR L0.WS ANI CAR LEASES

Employees who are made redundant are required to repay outstaridins car loans. Ho\vever, the Council will waive the penalty clause in respect o f early terminaiion of car lease agreements.

11.0 PAI.?IENT D: L E U OF NOTICE

You will be required to xork your period of notice. O d y in escq:ional circurnstacces nil1 you receive pajment in lieu. If you chose Option C you ivill have LO entitlement to norice.

12.0 HOLIDAY PAY

You xi11 be granted, before leaving the Council, the proportion of annual leave due for the actual service which has been given during the year. You should take t h s lea1.e prior to leaving except in unavoidable circumstances where your Depanment recommends payment of an allowance in lieu of outstanding ho 1 idays .

Revised: 7-3 January 1998

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Note: To use the table read off your age and number of completed years of service. This will then show the number of weeks pay for componsation payment.