Statement: Central Bank Response - C&AG Special Report on Management of Severance Payments in Public Sector Bodies

The Central Bank of Ireland notes the publication of the Comptroller and Auditor General’s report on severance payments in the public sector.

The introduction to the report states that ‘severance payments may represent the most practical and cost-efficient way of resolving an unsatisfactory or unworkable situation, and may be in the best interest of both the employer and employee’.

The Central Bank agrees with this statement and has put in place formal guidelines approved by the Budget and Remuneration Committee of the Central Bank Commission which sets out the governance and authorisation procedures that apply where a severance arrangement is considered to be the most appropriate response to a particular situation.

Managing Severance Payment Risks

The report notes that widespread use of severance payments in the public sector could result in appreciable outflows of public monies, however, it recognises that reluctance to use severance arrangements in appropriate circumstances could result in the retention of employees who are not contributing to the goals of the organisation and who may pose a significant risk to it.

The Central Bank, in recognising its responsibility to balance the use of public monies and minimise the risk to its operations, has made a number of changes to operating procedures and practices including:

• The Central Bank has shortened the probationary period from twelve to six months to ensure that performance and development issues are dealt with in a timely and focussed way and to ensure that sufficient time is allowed to address any concerns. 
• The Central Bank has made amendments to its pre-employment processes. 
• Central Bank practices have been amended to further distinguish between permanent employees and contract workers.

Notes

The Central Bank of Ireland currently employs 1,541 staff. The cases referred to arose in a period of both unprecedented renewal and growth of the Central Bank where staff numbers grew by approximately one third between 2009 and 2013.

No additional pension entitlements or added years were part of the Central Bank payments.

The report deals with severance payments, however, two of the cases referenced were settlements of legal proceedings issued against the Central Bank where no employment contract existed.

• A case where an individual was offered a position by the Central Bank but before that individual commenced employment, matters arising from the Banks Code of Ethics and pre-employment processes arose. The individual did not take up employment and the case was settled for €32,000 plus €25,000 legal costs. At no stage was the individual an employee of the Central Bank.
• A contractor worked for the Central Bank for more than five years but had never been an employee. At the end of the specified contract the status of this worker was in dispute. This resulted in various challenges and conflicting legal determinations. The matter was settled before the High Court was due to determine the issue.

The report identifies two cases where the employees had less than 2 years’ service. Both of the referenced payments were made to individuals employed on a three year fixed term contract.

In both cases performance issues resulted in the early termination of these contracts. Based on external legal advice, settlements were reached which equated to payments totalling less than half of the remaining contract fee being paid.

The settlement amount in each case is substantially less than may have been awarded by a court under current legislation.