£25m pay-offs to BBC staff described as “fundamental failure” by BBC Trust

by Redmans Solicitors on July 10, 2013

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The BBC Trust has heavily criticized the BBC after it was revealed in a report that the organisation had been paying more than it was contractually obliged to former staff.

The criticism came after a National Audit Office report was released last week which uncovered “huge payments” to former BBC staff who had been made redundant. The BBC Trust – the governing body of the BBC – weighed in with the heavy criticism, arguing that there had been a “fundamental failure of central oversight and control”.

The National Audit Office’s report – entitled “Severance and wider benefits for senior BBC managers” – was released on 1 July 2013 by the organisation.  The report had been commissioned by the BBC Trust after “public concern about the size and frequency of severance packages at the Corporation” and investigated such matters as the size of severance packages, the circumstances under which they were entered into, the reasonableness of the severance packages, and whether the packages were a justified and reasonable use of taxpayers’ money.

The report made the following key findings:

  • Two-thirds of senior managers received a redundancy payment, at a cost of £60 million to taxpayers. This has to be weighed against the fact that the BBC estimates, though, that it had saved £188 million by March 2013 from senior manager redundancies since 2005
  • The value payments in lieu of notice to senior managers generally exceeded the value of such payments paid throughout the civil service on average. In 14 of the 60 cases the NAO reviewed, the PILON payment received by the senior managers exceeded what the BBC was contractually obliged to pay, costing licence fee payers at least £1 million.
  • The Corporation had been aware on at least two occasions that staff had already obtained new employment but still paid the full value of the PILON payment to the employees
  • Decisions by the BBC to award severance payments that exceeded the contractual obligations of the parties were not subject to sufficient oversight and challenge.

The NAO therefore recommended that the BBC increase oversight of the manner in which severance packages are agreed in order to ensure transparency and that licence fee payers are receiving value for money in the Corporation’s commercial arrangements. It also recommended that the BBC should include within its remuneration strategy guidelines as to how decision on severance entitlements should be made, in order to avoid the problems exposed in the report.

Anthony Fry, BBC Trustee and Chair of the Trust’s Finance Committee, said: “… this report shows that the [BBC Trust’s] concerns were justified. Although the BBC has achieved significant savings in its senior manager pay bill, some of the NAO’s conclusions are deeply worrying, particularly the failure to follow agreed severance policies in a number of cases as a result of weak governance from the BBC Executive in the past. Such practices are unacceptable.”

Chris Hadrill, employment solicitor at Redmans, commented on the NAO’s report: “As the NAO report suggests, drafting and negotiating severance packages for senior employees can be a tricky business and should be handled in a professional manner by both parties. The report will therefore give the BBC Trust, senior BBC executives and the advisers of both parties plenty to think about.”

Redmans Solicitors offer employment law advice and compromise agreement advice to employees and employers

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