SCOTTISH GOVERNMENT ANNUAL REPORT ON THE USE OF SETTLEMENT AGREEMENTS APRIL 2018 – MARCH 2019

Introduction

1. The Scottish Public Finance Manual (SPFM) states that in considering terms for settlement agreements, severance, early retirement or redundancy packages public bodies should ensure that issues of regularity, propriety and value for money are fully taken into account. The (SG) will be entitled to use the fact that a settlement agreement has been entered into to collate and provide information to the Scottish Parliament on the number of settlement agreements and the costs of special payments across the Scottish Administration.1 This report should be seen therefore as the means by which pan Scottish Administration information has been gathered.

2. The SG role in the process (as set out in the SPFM) is one of consultation, advice and reporting. The SPFM supporting guidance on Settlement Agreements clearly states that the final decision as to whether to enter into a Settlement Agreement will rest with the Accountable Officer for the public body. The SPFM also sets out the requirements for annual accounts disclosure in relation to settlement agreements.

3. On 11 June 2014 the Scottish Government notified the Public Audit Committee of the implementation of above mentioned SPFM guidance on Settlement Agreements and undertook to report back to the Committee on the first year of operation of the guidance, spanning the period April 2014 – March 2015.2 The first report was submitted in June 2015 and was considered by the Public Audit Committee in February 2016. The Public Audit Committee noted the report in their legacy paper and asked that the Scottish Government continue to submit a report annually to the Parliament to be placed in the Scottish Parliament’s information centre, SPICe.3 Reports have been submitted annually and this is the fifth such report.

4. This report continues to fulfil the 2014 commitment and covers pan Scottish Administration information on:

 The status and use of Settlement Agreements;  Scottish Government Settlement Agreement guidance and review process;  The use of confidentiality clauses;  The number and cost of settlements entered into during 2018-19; and  Process improvements

Status and use of Settlement Agreements

5. A Settlement Agreement is a legally binding contract entered into by an employer and employee to resolve an employment dispute. Settlement Agreements are recognised in law and are an accepted part of employment practice. As such, they are the subject of guidance by the Advisory, Conciliation and Arbitration Service (ACAS).4 Settlement agreements are specific to an individual case and are

1 http://www.gov.scot/Topics/Government/Finance/spfm/severanceetcterms 2 Written submission from the Scottish Government to the Public Audit Committee, 11 June 2014 http://www.scottish.parliament.uk/S4_PublicAuditCommittee/General%20Documents/Written_submission_from_the _Scottish_Government_to_the_Public_Audit_Committee_dated_11_June_2014.pdf 33rd Report, 2016 (Session 4): Session 4 Legacy Paper http://www.parliament.scot/parliamentarybusiness/CurrentCommittees/97733.aspx#e 4 ACAS statutory code of practice on Settlement Agreements. https://www.acas.org.uk/media/3725/Code-of-Practice- on-settlement-agreements/pdf/11287_CoP4_Settlement_Agreements_v1_0_Accessible.pdf 1

separate from more general voluntary severance arrangements which enable organisations to make changes to their workforce by allowing staff the opportunity to leave the organisation with compensation as set out in their compensation schemes.

6. Settlement Agreements are used in circumstances where:

a) the employment relationship has broken down or been significantly impaired; b) the situation cannot be remedied through mediation or other personnel processes; and c) alternative routes to resolution would involve disproportionate cost at a tribunal or otherwise at law; and impair the efficient functioning of the service.

7. Consideration of the use of a Settlement Agreement will take into account:

a) the direct and indirect costs of alternative proceedings and of any awards that might be made; b) disruption to the effective and efficient operation of the service caused by an on-going dispute and the resultant stress on individuals; and c) the likely timescales involved, against the need to bring matters to a timely conclusion.

8. Scrutiny of Settlement Agreements by Accountable Officers is undertaken because:

a) they may involve payments to individuals above and beyond their normal contractual entitlement; b) Parliament and the public will want to be assured that, in all the circumstances of the case, their use was appropriate and reasonable; and c) there is a need to ensure their use does not cut across the important protections offered to whistleblowers.

Scottish Government Settlement Agreement guidance and review process

9. Settlement Agreement guidance introduced by the Scottish Government in 2014 provides for the central review and reporting of Settlement Agreements and is designed to increase transparency, promote consistency and ensure value for money.

10. The first line of assurance lies with the designated Accountable Officer for each body as set out in the Scottish Public Finance Manual5 (SPFM). The SPFM notes that “the essence of the Accountable Officer's role is a personal responsibility for the propriety and regularity of the finances under their stewardship and for the economic, efficient and effective use of all related resources. Accountable Officers are personally answerable to the Parliament for the exercise of their functions”.6 The SPFM and supporting guidance makes it clear that final decisions on Settlement Agreements rest with the Accountable Officer.

11. Our guidance sets out the process for interaction between a designated Accountable Officer and the Scottish Government, and requires the relevant body to consult the Scottish Government before entering into a Settlement Agreement and to submit a business case.

12. The bodies covered by the reporting procedure in the Scottish Government guidance are set out at Annex A. For NHSScotland bodies, the reporting procedure follows a similar process and is overseen by DG Health and Social Care / Chief Executive of NHSScotland. As noted in the 2014-15 year report, scrutiny and oversight for the college sector is delegated to the (SFC).

5 http://www.gov.scot/Topics/Government/Finance/spfm/Intro 6 http://www.gov.scot/Topics/Government/Finance/spfm/Accountability 2

Confidentiality clauses

13. At the request of the employee or their legal representative, Settlement Agreements may include a voluntary provision whereby the parties agree to keep the agreement itself confidential and not disclose its details to third parties. Inclusion of such a clause protects the rights of the employee who may have legitimate concerns that disclosure of the terms and circumstances of the agreement and their identity would impact negatively on their privacy and employability. The ACAS guidance provides a model Settlement Agreement which includes a standard confidentiality clause.7

14. Nothing, however, in a Settlement Agreement can prevent the individual from making a protected disclosure under whistleblowing legislation. Any agreement which sought to prevent staff from raising concerns about health and safety or malpractice would be void under the Employment Rights Act 1996 (as amended by the Public Interest Disclosure Act 1998).

Information sharing

15. In presenting material we are mindful of the need to respect the confidentiality of Agreements and the general entitlement of individuals to privacy. We have thus provided information on the number of Settlement Agreements entered into and the costs involved.

16. Disclosing the name of the body entering into the agreement alongside the cost can effectively disclose the identity of an individual. As with the previous reports, an anonymised breakdown of each of the agreements and the associated costs is thus provided at Annex B.

Numbers and costs of settlements

17. Headline costs and number of Settlement Agreements for 2018-19 are set out below. A full anonymised breakdown is provided at Annex B.

18. Table of Agreements and associated costs (to nearest £)

Total Non- Number of Oversight Number of Number gross cost contractual confidentiality Body Agreements of bodies (£) element clauses used Scottish Government 24 15 676,472 466,483 16 and Public bodies NHSScotland 33 14 727,974 583,769 0 Scottish Funding 13 5 389,411 122,896 10 Council 34 TOTALS 70 1,793,857 1,173,148 26

19. The costs above include the total gross cost of the Settlement Agreement to the employer, including the contractual and non-contractual payments made to the employee and ancillary costs, such as the cost of negotiating and concluding the settlement and any legal costs.

20. Contractual payments are those to which the employee is legally entitled. These will include payments such as, on termination, notice payments and pay in lieu of time owed. They will also

7 https://www.acas.org.uk/media/3736/Settlement-Agreements-A-guide/pdf/Settlement_agreements_Dec_18.pdf 3

include any lump sum and pension payments to which the employee is entitled on termination of employment through the Civil Service Compensation Scheme or an equivalent scheme.

21. Non-contractual payments are those offered in order to resolve the employment dispute.

22. The level of proposed non-contractual payment is included in the draft business case submitted for consideration. This is weighed against the risks and costs of not entering into a Settlement Agreement, as set out in paragraph 5 above.

23. Employment disputes are fact and case specific, and the number of settlements (and overall cost) reported in a given year will fluctuate relative to the number of employment disputes in that year across the range of bodies. The objective here is to ensure that business cases for settlement are scrutinised effectively and that robust controls are in place rather than to bear down on the number of cases. The business case process aims to ensure that these are the best value conclusions to disputes. While the number of cases this year has decreased we would not draw inference from this fact or assume that it will, or should, continue in future years.

24. When considered against the overall size of the public sector workforce and the number of leavers per annum however, it is clear that, Settlement Agreements are used only in very limited circumstances– in NHSScotland for example, amongst a workforce of over 160,000 staff and a cohort of over 10,000 leavers, 33 agreements were concluded. Similarly, the costs of settlements were a tiny fraction of the overall staff budget of over £6 billion.

Governance and process improvements

25. The Scottish Ministers considered wider severance issues and consulted on ‘A Severance Policy for Scotland’ in 2017. The consultation sought views on four policy options for the capping, recovery and changing terms of exit payments for staff working in the devolved public sector. The consultation does not cover civil service as terms and conditions relating to the civil service are reserved. This consultation enabled employers, unions and wider public debate to shape the approach to severance arrangements in Scotland. As a result of this consultation, and wider public and parliamentary scrutiny through the Public Audit and Post-legislative Scrutiny (PAPLS) Committee, the severance policy was amended through an update to the SPFM on 27 September 2019. The new policy includes an administrative severance payment cap of £95,000 ensures that payback periods for voluntary exit schemes do not exceed 24 months and introduces improved governance of cases. The new policy will apply to Settlement Agreements made after 27 September 2019 and retains provision for the central review and reporting of Settlement Agreements as set out in paragraph 9 above.

Scottish Government reviews the guidance given to NHSScotland on an annual basis. The guidance within Scottish Government itself (for SG overseen bodies) has been similarly refined and improved. Scottish Government itself continues to engage with Internal Audit to provide assurance on the processes surrounding the scrutiny of data. Internal Audit have provided a substantial assurance opinion, the top assurance level available, noting that controls are robust and well managed and risk, governance and control procedures are effective in the delivery of the scrutiny and challenge function and collective oversight.

4

26. Colleges

Colleges make a vital contribution to the Scottish Government’s commitment to improving the lives and employability of all Scotland’s people. Effective governance is fundamental in supporting colleges to improve the life chances of their students and the performance of businesses.

The college sector has embraced the need to focus on achieving the highest standards of governance.

A ‘Code of Good Governance for Scotland’s Colleges’ has been developed and the sector’s Good Governance Steering Group continues to meet to oversee its implementation and review.

The SFC is continuing to work with colleges to ensure that College board activities are sufficiently transparent, in line with the requirements of the Code, and the SFC continues to keep its guidance around settlement and severance arrangements to the college sector under review.

Conclusion

27. SPICe are asked to note this report.

5

ANNEX A LIST OF PUBLIC BODIES COVERED BY REVISED REPORTING PROPOSAL FROM 1 APRIL 2018 – 31 MARCH 2019 [N.B. this list will be updated from time to time as required]

Scottish Government

The Crown Office and Procurator Fiscal Executive NDPBs Service Accounts Commission for Scotland Architecture and Design Scotland Executive Agencies Bòrd na Gàidhlig Accountant in Bankruptcy Authority Disclosure Scotland Care Inspectorate Education Scotland Children’s Hearings Scotland Scottish Prison Service Community Justice Scotland Scottish Public Pensions Agency Student Awards Agency for Scotland Crofting Commission Social Security Agency David MacBrayne Ltd Transport Scotland Highlands and Islands Airports Ltd Highlands and Islands Enterprise Non Ministerial Offices (NMOs) Historic Environment Scotland Food Standards Scotland Loch Lomond and The Trossachs National National Records of Scotland Park Authority Office of the Scottish Charity Regulator National Galleries of Scotland Registers of Scotland National Library of Scotland Revenue Scotland National Museums of Scotland Scottish Courts and Tribunals Service Police Investigations and Review Scottish Housing Regulator Commissioner Scottish Fiscal Commission Quality Meat Scotland Risk Management Authority Public Corporations Royal Botanic Garden, Edinburgh Caledonian Maritime Assets Ltd Scottish Agricultural Wages Board Prestwick Airport Scottish Children’s Reporter Scottish Canals Administration Scottish Water Scottish Criminal Cases Review The Crown Estate Scotland – Interim Commission Management Scottish Environment Protection Agency Scottish Funding Council Scottish Futures Trust Scottish Legal Complaints Commission Scottish Natural Heritage Scottish Qualifications Authority Scottish Social Services Council Skills Development Scotland VisitScotland 6

Water Industry Commission for Scotland Colleges Ayrshire College Advisory NDPBs Borders College Judicial Appointments Board for Scotland City of Glasgow College Local Government Boundary Commission Dumfries and Galloway College for Scotland Dundee and Angus College Mobility and Access Committee for Edinburgh College Scotland Fife College Scottish Advisory Committee on Forth Valley College Distinction Awards Glasgow Clyde College Scottish Law Commission Glasgow Kelvin College Scottish Local Authorities Remuneration Inverness College Committee Lews Castle College Moray College Tribunals New College Lanarkshire Additional Support Needs Tribunals for North East Scotland College Scotland North Highland College First-tier tax Tribunal for Scotland Orkney College Lands Tribunal for Scotland Perth College Mental Health Tribunal for Scotland Sabhal Mor Ostaig Parole Board for Scotland Shetland College Private Rented Housing Panel/ South Lanarkshire College Homeowner Housing Panel West College Scotland Scottish Charity Appeals Panel West Highland College Upper tax Tribunal for Scotland West Lothian College

Health Bodies Healthcare Improvement Scotland Other Significant National Bodies Mental Welfare Commission for Scotland Drinking Water Quality Regulator NHS 24 HM Chief Inspector of Constabulary in NHS Boards Scotland NHS Education for Scotland HM Chief Inspector of Prisons in Scotland NHS Health Scotland Board HM Chief Inspector of Prosecution in NHS National Services Scotland Scotland National Waiting Times Centre Board Independent Living Fund Scotland Scottish Ambulance Service Board Office of the Queens Printer for Scotland State Hospital Board for Scotland Scottish Roadworks Commissioner The Scottish Police Authority The Scottish Fire and Rescue Service

Scrutiny and oversight for the college sector is delegated to the Scottish Funding Council (SFC).

7

ANNEX B LIST OF AGREEMENTS AND COSTS

TABLE A: All Agreements in cost order (including Scottish Government and public bodies, NHSScotland and Further Education colleges)

Overall cost Contractual Non contractual cost Ancillary costs Confidentiality Number (£) cost (£) (£) (£) Clause used 1a 500 0 500 0 Yes 2a 585 0 85 500 No 3a 1,000 0 1,000 0 No 4a 1,140 0 1,140 0 Yes 5a 2,002 502 1,500 0 Yes 6a 2,400 0 2,000 400 No 7a 2,655 0 2,405 250 Yes 8a 3,742 1,928 1,314 500 No 9a 4,000 0 3,500 500 No 10a 4,705 630 3,825 250 Yes 11a 5,000 0 5,000 0 No 12a 5,003 0 4,378 625 No 13a 5,148 0 4,898 250 Yes 14a 5,500 0 5,000 500 No 15a 5,500 0 4,500 1,000 No 16a 6,000 0 6,000 0 Yes 17a 6,205 2,569 3,336 300 Yes 18a 7,000 0 6,000 1,000 No 19a 7,899 0 7,649 250 Yes 20a 7,947 1,947 6,000 0 Yes 21a 8,500 0 8,500 0 Yes 22a 9,000 0 8,000 1,000 No 23a 9,000 0 8,000 1,000 No 24a 9,216 0 6,216 3,000 No 25a 9,300 0 8,500 800 No 26a 10,000 0 10,000 0 No 27a 10,300 0 10,000 300 No 28a 10,500 0 10,000 500 No 29a 10,750 0 10,000 750 No 30a 11,200 3,750 6,250 1,200 Yes 31a 11,220 840 10,080 300 No 32a 11,952 2,420 9,232 300 Yes 33a 12,500 0 11,500 1,000 No 34a 12,500 0 12,000 500 No 35a 14,001 3,552 10,199 250 Yes 36a 14,500 0 13,500 1,000 No 37a 14,660 0 14,660 0 No 38a 15,000 0 15,000 0 No 39a 15,107 0 13,500 1,607 No 40a 20,112 12,250 7,112 750 No 41a 20,267 5,040 14,727 500 Yes 42a 22,348 9,145 12,903 300 Yes 43a 23,142 7,225 15,617 300 No 8

Overall cost Contractual Non contractual cost Ancillary costs Confidentiality Number (£) cost (£) (£) (£) Clause used 44a 23,617 2,617 20,000 1,000 No 45a 25,000 0 25,000 0 Yes 46a 25,280 280 25,000 0 No 47a 25,500 0 25,000 500 No 48a 26,000 0 26,000 0 Yes 49a 26,500 0 25,000 1,500 No 50a 30,512 10,695 19,317 500 Yes 51a 31,250 0 30,000 1,250 No 52a 32,500 0 30,000 2,500 No 53a 32,714 314 30,000 2,400 Yes 54a 35,127 20,451 14,376 300 No 55a 37,306 0 36,806 500 No 56a 39,842 23,732 15,860 250 Yes 57a 40,300 7,785 32,215 300 Yes 58a 44,852 10,004 33,348 1,500 No 59a 50,250 0 50,000 250 No 60a 51,250 0 50,000 1,250 No 61a 54,000 0 54,000 0 Yes 62a 57,000 0 57,000 0 No 63a 59,292 58,182 0 1,110 No 64a 60,833 42,042 18,541 250 Yes 65a 72,625 58,151 14,224 250 Yes 66a 75,000 0 50,000 25,000 Yes 67a 95,300 24,074 70,926 300 Yes 68a 99,897 88,397 6,500 5,000 No 69a 124,243 124,243 0 0 No 70a 128,862 29,352 98,510 1,000 No

9

TABLE B: NHSScotland Agreements in cost order

Non Ancillary Contractual Confidentiality Number Overall cost (£) contractual costs cost (£) Clause used cost (£) (£) 1b 585 0 85 500 N 2b 2,400 0 2,000 400 N 3b 3,742 1,928 1,314 500 N 4b 4,000 0 3,500 500 N 5b 5,003 0 4,378 625 N 6b 5,500 0 4,500 1,000 N 7b 5,500 0 5,000 500 N 8b 7,000 0 6,000 1,000 N 9b 9,000 0 8,000 1,000 N 10b 9,000 0 8,000 1,000 N 11b 9,216 0 6,216 3,000 N 12b 9,300 0 8,500 800 N 13b 10,300 0 10,000 300 N 14b 10,500 0 10,000 500 N 15b 10,750 0 10,000 750 N 16b 12,500 0 12,000 500 N 17b 12,500 0 11,500 1,000 N 18b 14,500 0 13,500 1,000 N 19b 15,000 0 15,000 0 N 20b 15,107 0 13,500 1,607 N 21b 20,112 12,250 7,112 750 N 22b 23,617 2,617 20,000 1,000 N 23b 25,280 280 25,000 0 N 24b 25,500 0 25,000 500 N 25b 26,500 0 25,000 1,500 N 26b 31,250 0 30,000 1,250 N 27b 32,500 0 30,000 2,500 N 28b 37,306 0 36,806 500 N 29b 44,852 10,004 33,348 1,500 N 30b 50,250 0 50,000 250 N 31b 51,250 0 50,000 1,250 N 32b 59,292 58,182 0 1,110 N 33b 128,862 29,352 98,510 1,000 N

10

TABLE C: Further Education College Agreements in cost order

Non Ancillary Contractual Confidentiality Number Overall cost (£) contractual costs cost (£) Clause used cost (£) (£) 1c 2,655 0 2,405 250 Yes 2c 4,705 630 3,825 250 Yes 3c 5,148 0 4,898 250 Yes 4c 7,899 0 7,649 250 Yes 5c 8,500 0 8,500 0 Yes 6c 11,952 2,420 9,232 300 Yes 7c 14,001 3,552 10,199 250 Yes 8c 14,660 0 14,660 0 No 9c 22,348 9,145 12,903 300 Yes 10c 39,842 23,732 15,860 250 Yes 11c 60,833 42,042 18,541 250 No 12c 72,625 58,151 14,224 250 Yes 13c 124,243 124,243 0 0 No

11

TABLE D: Scottish Government and other public bodies Agreements in cost order

Non Ancillary Contractual Confidentiality Number Overall cost (£) contractual costs cost (£) Clause used cost (£) (£) 1d 500 0 500 0 Yes 2d 1,000 0 1,000 0 No 3d 1,140 0 1,140 0 Yes 4d 2,002 502 1,500 0 Yes 5d 5,000 0 5,000 0 No 6d 6,000 0 6,000 0 Yes 7d 6,205 2,569 3,336 300 Yes 8d 7,947 1,947 6,000 0 Yes 9d 10,000 0 10,000 0 No 10d 11,200 3,750 6,250 1,200 Yes 11d 11,220 840 10,080 300 No 12d 20,267 5,040 14,727 500 Yes 13d 23,142 7,225 15,617 300 No 14d 25,000 0 25,000 0 Yes 15d 26,000 0 26,000 0 Yes 16d 30,512 10,695 19,317 500 Yes 17d 32,714 314 30,000 2,400 Yes 18d 35,127 20,451 14,376 300 No 19d 40,300 7,785 32,215 300 Yes 20d 54,000 0 54,000 0 Yes 21d 57,000 0 57,000 0 No 22d 75,000 0 50,000 25,000 Yes 23d 95,300 24,074 70,926 300 Yes 24d 99,897 88,397 6,500 5,000 No

12