£254 million spent on early departure packages over nearly four years, but with potential savings over time of up to £305 million per year.
Welsh public bodies have made extensive use of early departures to support workforce cost reduction, alongside a range of other approaches. Overall the governance of early departures has been satisfactory, although not all schemes complied fully with good practice principles. This is the main conclusion of a report published today by the Auditor General for Wales.
Auditor General for Wales, Huw Vaughan Thomas said:
Early departures provide public bodies with an opportunity to re-shape their workforce and make cost savings in a time of austerity. However, it is vital that early departures are managed properly so that the public can be confident that services can still be maintained and that the promised savings are being made. The upfront costs of early departures can be substantial and my report emphasise the importance of adequate scrutiny of high value exit packages in particular, such as those for senior managers.
The report examines whether Welsh public bodies can demonstrate that they have secured value for money, from the use of early departures to control or reduce workforce costs. The report draws on information gathered from 58 Welsh public bodies between February and June 2014, and looks back over the use of early departure schemes since April 2010. Early departure schemes offer a financial incentive or ‘exit package’ for employees to leave employment, with the general expectation that the employing organisation will then realise a longer-term saving.
Between April 2010 to December 2013, 10,658 staff from the 58 Welsh public bodies surveyed left employment through early departure schemes, which is equivalent to around four per cent of the workforce as it stood at April 2010. Some 72 per cent of early departures were from local authorities and national park authorities. NHS bodies and the Welsh Government accounted for 11 and nine per cent of early departures respectively. However the 977 staff who left the Welsh Government over this period through early departures is equivalent to around 15 per cent of its April 2010 headcount.
The upfront cost of these early departure packages totalled £254 million. However, the report found that assuming staff were not directly or indirectly replaced public bodies would on average start to make cost savings after 10 months. Once this payback period elapsed, public bodies stood to save up to £305 million per year. However, public bodies might not realise these savings in full for a variety of reasons.
While the exact contribution of early departures is unclear, staff salary costs across Welsh public bodies reduced by around £447 million in real terms between 2009-10 and 2013-14. The report finds that public bodies have been realising workforce cost savings through a variety of other means, including through ‘vacancy management’. However, if essential vacancies are not filled simply to realise short-term savings, the report notes that staff in post could have to carry an additional workload which could result in an increase in sickness absence and may impact negatively on staff morale.
The report finds that, while the overall governance of early departures has been satisfactory, there is scope for improvement. The report makes seven recommendations on issues relating to:
- the use of business cases to support all individual early departures that identify the cost and service delivery implications of the individual leaving and take account of wider workforce planning;
- scrutiny of the value for money of early departure schemes as part of public bodies’ established governance arrangements;
- record keeping arrangements; and
- for the Welsh Government to work with local government to seek agreement on some common principles to underpin any early departure arrangements arising from local government mergers.