Budget transfer: Voluntary Release and Redundancy Scheme in 2018

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A decision made 8 January 2019:

Decision reference: MD-TR-2018-0153
Decision Summary Title:	Transfer of funding from Central Contingencies to various departmental budgets to recognise the costs associated with the Voluntary Release and Redundancy Scheme in 2018		Date of Decision Summary:	31st December 2018
Decision Summary Author:	Financial Performance Reporting Manager		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Transfer of funding from Central Contingencies to various departmental budgets to recognise the costs associated with the Voluntary Release and Redundancy Scheme in 2018		Date of Written Report:	31st December 2018
Written Report Author:	Financial Performance Reporting Manager		Written Report : Public or Exempt?	Public
Subject: Transfer of funding from Central Contingencies to various departments’ revenue heads of expenditure to recognise the costs associated with the 2018 Voluntary Release (VR) and Redundancy Scheme.
Decision(s): The Minister approved a non-recurring budget transfer in 2018 of £300,541.65 to departments from Central Contingency – Redundancy Provision for VR Applications approved and signed between 1st August and December 12th 2018.
Reason(s) for Decision: Article 17(2) of the Public Finances (Jersey) Law 2005 states that the Minister for Treasury and Resources is authorised to approve the transfer from contingency expenditure to heads of expenditure of amounts not exceeding, in total, the amount available for contingency expenditure in a financial year. The current Contingency Allocation Policy (published as R.112/2018) sets the requirement for all allocations from contingency over £50,000 to be considered by the Investment Appraisal Board, Principal Accountable Officer and States Treasurer prior to submission to the Minister for approval. The Board has recommended this request for approval. The request has also been recommended for approval by the Principal Accountable Officer and States Treasurer. International Financial Reporting Standards (IFRS) interpreted for the States of Jersey in the Jersey Financial Reporting Manual (JFReM) require termination benefits to be recognised as an expense at the point at which the entity can no longer withdraw the offer of those benefits. Accordingly, the full cost of all VRs must be recognised at the point a binding contract has been signed with the employee. The Council of Ministers approved the allocation of £2,000,000 from Central Contingencies to create a Redundancy Provision in 2015 to fund the first tranche of the scheme. The States Assembly approved a further £20,000,000 to be added to the Redundancy Provision across 2015 and 2016 to be funded by transfers from the Strategic Reserve Fund. MD-TR-2015-0141 approved funding of £4,666,119 to fund the Voluntary Release Scheme in 2015 in line with the allocation of funding approved by the States Assembly in P.72/2015 Medium Term Financial Plan 2016 – 2019 (as amended). MD-TR-2016-0058, MD-TR-2016-0082, MD-TR-2016-0114, MD-TR-2017-0010 and MD-TR-2017-0087 approved funding of £3,677,954.05 to fund applications approved and signed up to 31st December 2016 and also transferred savings of £864,227 from the departments to the Redundancy Provision as result of VR approvals earlier than anticipated in 2015. It was agreed by the States Assembly as part of the MTFP Addition Debate in 2016, following an estimate of funding requirements for redundancy for the remaining years of the MTFP, to transfer £6.88 million of the Redundancy Provision to the Restructuring Provision for 2018 and 2019. MD-TR-2017-0125 and MD-TR-2018-0008 approved funding of £713,995.54 to fund applications approved and signed up to 31st December 2017. MD-TR-2018-0088 approved funding of £234,541.02 to May and TR-2018-DD085 approved funding of £195,533.92 to August 2018 and this decision funds the next tranche of VR applications to 12th December and will leave a balance of £6.19 million in Contingency for future applications. The following transfers to departments totalling £300,541.65 are now required: CMD £ 94,150.50 CCA £ 16,275.55 HSSD £148,796.32 Department for Infrastructure £ 41,319.28
Resource Implications: Various departments’ revenue heads of expenditure to increase by a total of £300,541.65 in 2018 and Central Contingency – Redundancy Provision to decrease by the same amount. This decision does not change the total amount of expenditure approved by the States for the period of the current MTFP 2016 to 2019. The transfers are detailed in the attached report.
Action required: The Head of Decision Support to notify the Finance Directors of all relevant departments that the Decision has been approved.
Signature:		Position: Deputy S J Pinel Minister for Treasury and Resources
Date Signed:		Date of Decision:

Budget transfer: Voluntary Release and Redundancy Scheme in 2018

Treasury and Resources Department

Ministerial Decision Report

Transfer of funding from Central Contingencies to various departmental budgets to recognise the costs associated with the Voluntary Release and Redundancy Scheme in 2018.

Purpose of Report

To enable the Minister to approve the non-recurring budget transfer of £300,541.65 from Central Contingencies – Redundancy Provision to various departmental budgets, as outlined below. This is to recognise the costs associated with the Redundancy Scheme for 2018 to 12th December 2018.

Background

A voluntary release (“VR”) programme was run in 2015 closing at the end of July and re-opened in January 2016. As at 18th August 2018 a total of 641 applications for VR had been received (329 in 2015, 226 in 2016, 44 in 2017 and 42 in 2018) and a total of 199 have been approved. The scheme remains open for the foreseeable future in order to support organisational change initiatives. In addition, a total of 59 employees have been made compulsory redundant and 12 employees have received a transfer payment to date in 2018.

The Council of Ministers approved the allocation of £2,000,000 from Central Contingencies to create a Redundancy Provision in 2015 to fund the first tranche of the scheme. The States Assembly approved a further £20,000,000 to be added to the Redundancy Provision across 2015 and 2016 to be funded by transfers from the Strategic Reserve Fund with £4,000,000 to be transferred in 2015 and £16,000,000 in 2016. Following the completion of the 2015 VR scheme the remaining money was drawn down for funding of new applications in 2016. In total this left £17.33 million available for VR funding from January 2016.

A transfer of a £3.67 million was made for VRs and Compulsory Redundancies (“CR”) agreed in 2016 up to the 31st December 2016. Savings of £864,227 were transferred from the departments to the Redundancy Provision as a result of VR approvals earlier than anticipated in 2015. Funding for adjustments made to CR payments following the agreement of the 1% pay rise in 2016 required an additional transfer of £8,404.

A transfer of £713,995.54 was made for VRs and Compulsory Redundancies (“CR”) agreed in 2017 up to the 31st December 2017.

It was also agreed to transfer £6.88 million of the Redundancy Provision to the Restructuring Provision. This decision was taken by the States Assembly following an estimate of funding requirements for redundancy for the remaining years of MTFP.

A transfer of £430,074.94 was made for VRs and CRs up to August 2018.

VRs agreed to be centrally funded by the redundancy decision panel for the period to 12th December 2018 amounts to a commitment of an additional £300,541.65 of which agreements have now been formally signed, leaving a balance of approximately £6.19 million remaining to fund redundancy for the remainder of the MTFP period to December 2019. The following transfers to departments totalling £300,541.65 are now required:

CMD £ 94,150.50
CCA £ 16,275.55
HSSD £148,796.32
Department for Infrastructure £ 41,319.28

Recommendation

The Minister is recommended to approve a non-recurring budget transfer of £300,541.65 in 2018 from Central Contingency – Redundancy Provision to departments as outlined above.

Reason for Decision

Article 17(2) of the Public Finances (Jersey) Law 2005 states that the Minister for Treasury and Resources is authorised to approve the transfer from contingency expenditure to heads of expenditure of amounts not exceeding, in total, the amount available for contingency expenditure in a financial year.

The current Contingency Allocation Policy (published as R.112/2018) sets the requirement for all allocations from contingency over £50,000 to be considered by the Investment Appraisal Board, Principal Accountable Officer and States Treasurer prior to submission to the Minister for approval. The Board has recommended this request for approval. The request has also been recommended for approval by the Principal Accountable Officer and States Treasurer.

International Financial Reporting Standards (IFRS) interpreted for the States of Jersey in the Jersey Financial Reporting Manual (JFReM) require termination benefits to be recognised as an expense at the point at which the entity can no longer withdraw the offer of those benefits. Accordingly, the full cost of all VRs must be recognised at the point a binding contract has been signed with the employee.

On 9th December 2015 the Council of Ministers agreed that approvals for funding of VR and CR would be delegated to a Central Panel comprising the Chief Executive Officer, the Treasurer of the States and the Director of Human Resources.

MD-TR-2015-0141 approved funding of £4,666,119 to fund the Voluntary Release Scheme in 2015 in line with the allocation of funding approved by the States Assembly in P.72/2015 Medium Term Financial Plan 2016 – 2019 (as amended).

MD-TR-2016-0058, MD-TR-2016-0082, MD-TR-2016-0114, MD-TR-2017-0010 and MD-TR-2017-0087 approved funding of £3,677,954.05 to fund applications approved and signed up to 31st December 2016 and also transferred savings of £864,227 from the departments to the Redundancy Provision as a result of VR approvals earlier than anticipated in 2015.

It was agreed by the States Assembly as part of the MTFP Addition debate in 2016, following an estimate of funding requirements for redundancy for the remaining years of the MTFP, to transfer £6.88 million of the Redundancy Provision to the Restructuring Provision for 2018 and 2019.

MD-TR-2017-0125 and MD-TR-2018-008 approved funding of £713,995.54 to fund applications approved and signed up to 31st December 2017.

MD-TR-2018-0088 approved funding of £234,541.02 to May 2018 and TR-2018-DD085 approved funding of £195,533.92 to August 2018.

This decision funds the next tranche of VR applications to 12th December 2018 and will leave a balance of £6.19 million in Contingency for future applications.

Resource Implications

Various departments’ revenue heads of expenditure, as outlined above, to increase by £300,541.65 in 2018 and the Central Contingency – Redundancy Provision to decrease by the same amount.

This decision does not change the total amount of expenditure approved by the States for the period of the current MTFP 2016 to 2019.

Report author : Financial Performance Reporting Manager	Document date: 31st December 2018.
Quality Assurance / Review : Head of Decision Support	File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2018-0153 - Allocations from Contingency for 2018 VRs
MD sponsor : Director of Financial Planning and Performance