“What I don’t know is whether the terms of the three executives’ contracts meant that the council was legally obliged to pay them £670k. ”

Well, that’s the £670,000 question, and if these guys were paid highly enough and worked there long enough they could certainly have built up that much redundancy entitlement. “Council refuses to steal from outgoing employees” isn’t much of a story, although a point could obviously be made about how much they were paid in the first place.

…I’d check myself, but the only sources I can find is CYPN, which isn’t loading, this site, and the Star, which I’m not clicking on ‘cos I’m at work and there would be a high risk of boobies.

Would only be polite to Hat Tip Private Eye who ran this last week.

Mind, if all 50 Connexions staff get £11,400 each, that’s £570k right there… suddenly £700k doesn’t seem that much of a saving, does it? One might wonder whether it was actually worth axing a youth employment service at a time of the highest youth unemployment in modern history anyway, but especially if the net savings are trivial.

Interesting that you single our LibDem controlled Sheffeild council in this article. How about the ridiculous 103 executives each receiving £128000 in pay-offs and payments to their pension funds (totaling £13m) as a result of redundancies in Labour controlled Glasgow council.

@bgb and if those payments are contractual, it is entirely possible the contracts were signed when Sheffield council was under Labour control.

What I don’t know is whether the terms of the three executives’ contracts meant that the council was legally obliged to pay them £670k.

Google Sheffield Council redundancy Bashforth…

The Star:

A GOVERNMENT minister has slammed Sheffield Council for awarding more than £670,000 in pay-offs to three senior managers, one of whom received £340,000.
The settlements were made as part of contractual obligations to the former assistant chief executives, who were made redundant.

An additional £21,722 of pension contributions will be split between them.

My emphasis in bold.

@Tony and @ukliberty – from same article:

“Sheffield Council’s Lib Dem leadership said terms and conditions triggering the payments were set by the previous Labour administrations.”

OP, Chaminda Jayanetti: “What I don’t know is whether the terms of the three executives’ contracts meant that the council was legally obliged to pay them £670k.”

Without the consent of the executives, it is unlikely that we will fully know the terms of their redundancy payments.

If, and this is my presumption, their contracts demanded such payments, they would be fine examples of rent seeking. Had the execs retained their jobs, they would have been well paid; when they were asked to leave, they appear to have been paid for two or more years of work.

The rational response to this, however, should not be angry at them. After all, similar payments for not working are made every day to execs in private industry, quangos and government. Just look at Mark Hurd who has departed from HP under a cloud.

We should be angry at ourselves for tolerating managerialist bodies where execs determine payment for themselves without consideration of productivity. We should be identifying the execs who sign employment contracts for other rent seekers. We should stop subscribing to the myth that there are execs with magical skills and start demanding payment by results (noting the consequences of any target system).

We should also, possibly, be pushing for an upper limit on the amount of redundancy entitlement that can be accrued per year.

Interesting that this case, of a Lib Dem run council making contractual payments it is legally obliged to which were initiated by their Labour predecessors, was reported on here whilst cases like Labour controlled Knowsley Council funneling over £250,000 of tax payers money to the Labour party aren’t.

http://www.libdemvoice.org/knowsley-council-labour-conference-2-20975.html

@10. Chaise Guevara: “We should also, possibly, be pushing for an upper limit on the amount of redundancy entitlement that can be accrued per year.”

I know where you are coming from, but fear that such a proposition would increase the size of golden handshakes or create a stage payment system. We need to use mechanisms that reward long term results whilst allowing organisations to say “goodbye, this isn’t working” at minimum cost.

In theory, stock purchase options allow companies to pay execs by result, but reality differs. Stock purchase, of course, is not relevant for public service execs.

@3 I would have done so had I seen it (I get the Eye most weeks but I don’t read it cover to cover). The report I saw was the (clearly later) CYPN story – that’s the report that places the payout in the context of the youth service cuts/savings.

@4 I quite agree

@8 bgb – thanks for flagging this on A Thousand Cuts. As I mentioned (after you’d already posted your comments here, obviously), this wasn’t written as an anti-Lib Dem story per se – though I’d still take issue with their spending cuts policy at a national level. Given the information reported by the Star, it’s fairly clear in my mind that the previous Labour council leadership is primarily at fault for the level of the payout. A Thousand Cuts, for what it’s worth, is not aligned with any party.

@9 Frankly I would blame them for demanding so much from the taxpayer; I don’t have any tolerance of people entitling themselves to vast sums of public money when they don’t need it and when there’s no good reason for them to have it. But you’re right – this is a practise that originated in the private sector and appears to have infected the highest echelons of the public sector. It’s a result, in my view, of the previous Labour government’s determination to crowbar the ‘best’ elements of the private sector into the public sector – often crowbarring in the worst elements in reality, such as these ludicrously large golden goodbyes. Of course all those made redundant should receive a decent parachute payment – but the idea of writing in exorbitant redundancy terms for senior managers on the basis that it helps get the ‘best people’ is a nonsense. If top managers are the ‘best people’, there won’t be a need to make them redundant.

There’s one final question – allowing for the fact these contracts were agreed under Labour, should the Lib Dems be blamed for this at all?

I’m not persuaded by the Labour councillor’s argument in the Star article that the Lib Dems should have saved money elsewhere – making three low-paid frontline staff redundant would have incurred a lower payout, but would have amounted to protecting management over frontline workers.

But I do think that the Lib Dems are responsible for the national policy of heavy spending cuts that makes widespread redundancies inevitable. Redundancies require substantial payouts – if you make lots of low-paid staff redundant, you end up with a large collective payout, as @4 says; while if you make a few managers redundant, you end up with large individual payouts.

If that’s what assistant chief execs get, they probably can’t afford to sack the actual chief execs.

“I know where you are coming from, but fear that such a proposition would increase the size of golden handshakes or create a stage payment system. We need to use mechanisms that reward long term results whilst allowing organisations to say “goodbye, this isn’t working” at minimum cost.”

I’d say the current system works very well, but wants capping to make it fairer for employers. However, I admit the idea that you have to pay large amounts of severance money to long-term workers is debateable and contraversial.

“If the council was obliged to make these payments under the contracts, then they clearly agreed to some pretty daft contracts for senior management.”

Well, mebbe……

“We should also, possibly, be pushing for an upper limit on the amount of redundancy entitlement that can be accrued per year.”

Yup, sounds good to me. So, you’re with me then on this idea that civil servants shouldn’t be allowed to get 3 years’ pay if they’re made redundant then?

Or maybe not:

http://liberalconspiracy.org/2010/07/26/why-civil-servants-are-angry-with-this-coalition-government/

http://liberalconspiracy.org/2010/03/08/pcs-workers-start-two-day-strike-against-cuts/

Oh well, no one expects consistency in politics, do they?

If top managers are the ‘best people’, there won’t be a need to make them redundant.

With respect, I think you’re over-egging the pudding here.

@13 Chaminda: “If top managers are the ‘best people’, there won’t be a need to make them redundant.”

I can’t be that absolutist. You might employ the “best person” following a couple of days of interviews but circumstances may not work out. It might be “your” problem for picking the wrong person or “their” problem if they have lied about their skills. So you. as employer, will ask for their resignation and pay compensation.

But how did we get into a world where it pays to get sacked?

@18 A tad absolutist, perhaps – actually more in this case where the redundancies are for cost cutting purposes, than in the kind of scenario you mentioned. But I still see no justification at all for these solid gold (as opposed to merely gold-plated) redundancy payments for managers, be they in the public or the private sector.

@16 Tim Worstall: “Oh well, no one expects consistency in politics, do they?”

Tim, I presume that we could exchange Keynes for eternity “When the facts change, I change my mind. What do you do, sir?”

I have been trying to drive this debate onto sane ground. Presumptuous, I know. I’ll ignore your words on long term civil service benefits because it was an opportunist attack. Give us a positive argument, please.

Business and public service are not served by drop-in star managers; some will deliver long term change and results; others are pigeon shitters. Workers seek managers who think about the long term. Nokia changed from a national wire wrapping operation to an international electronics company; few companies could have achieved that and it was delivered by star execs and managers who did not drip pigeon shit on workers. Nokia was a bizarre exception.

@18, 19

It’s simply “Too big to fail”, but on a personal level. It’s been going on at executive level in the private sector for decades, and I was none too surprised when the banking industry demanded payment for failure – it’s simply been the default position of a rarefied class for too long now.