Explainer: Exit deals and payoffs in publicly funded organisations

The scale of the payment made to Dean Sullivan as he departed the HSE prompted renewed calls from Opposition politicians on Thursday for greater transparency relating to exit packages given to senior executives in publicly funded organisations.

Sullivan, whose salary was around €200,000, received almost twice that – €388,983 – after working for just 6½ years at the organisation. The figure, it was confirmed by various parties on Thursday, consisted of both a redundancy payment and payment agreed following mediation that arose out of a legal process.

According to the guidelines set out by the Department of Public Expenditure and Reform (DPER), which must sign off on all such agreements, “the offer of discretionary payments can arise in situations in which it is considered appropriate, as part of best human resource management practice, to provide for the ending of an existing employment contract where this is considered to be in the best interests of the organisation in question”.

The DPER, however, suggests that such discretionary payments should be capped at a maximum of three weeks’ pay for each year of service on top of statutory entitlements.

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Statutory redundancy amounts to two weeks’ pay for each year of service plus one week, but the pay element is capped at €600 per week. In Sullivan’s case this would amount to about 14 weeks’ salary or €8,400, while the discretionary element would not be expected to have been more than around €77,000.

That would leave roughly €300,000 to be accounted for by the legal process element.

The absence of a confidentiality clause would make it possible to obtain an actual breakdown for the figures and the DPER guidance suggests such clauses only be included in “very exceptional” circumstances.

However, employment lawyer Anne O’Connell, of AOC Solicitors, who lectures on the subject at the Law Society, says such clauses are included in pretty much every such deal in the private sector and are commonplace in the public sector too.

“They are seen as necessary because the facts in every single case are particular to that person, but if the amounts involved are publicised you may incentivise the next employee to seek the same amount even though their claim may be entirely different.”

In Sullivan’s case, the amount was confirmed after he waived confidentiality in relation to that aspect of his exit package, but no other details were revealed.

The fact that it was agreed after mediation is significant, says O’Connell, as “confidentiality is seen as key to that process; it is regarded as essential that you are able to speak freely and that nothing you do say can be used against you afterwards”.

[ More high-cost HSE redundancies may follow €389,000 package for former executive, says Donnelly ]

And while employers generally don’t want figures that might establish precedents for others revealed, or former employees speaking publicly about other aspects of their case, employees “also want to control the narrative around their departure when it comes to looking for another job”.

How easily they might find one is likely to play a part in determining the amount offered. If the employee takes a case to the Workplace Relations Commission for unfair dismissal they can be awarded up to two years’ salary, although the amounts involved can be more if there are equality issues or penalisation arising from the making of a protected disclosure.

However, in most instances the amount awarded will be based on losses suffered and if the person cannot show they have tried to secure alternative employment then the compensation will be reduced. That will generally form part of an employer’s calculation on how to handle a situation.

So too, though, says O’Connell, will the potential for a High Court injunction.

“The legal costs involved then can be huge, particularly as you tend to be looking at emergency applications, and employers are very conscious of that.

“The legal element in this instance could be absolutely anything, we just don’t know. And large as the amount he received might seem, it is not two years’ salary.”

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