For the past five years, it seems that not a day has gone by without a news story about the financial pressures facing the public sector.
For most public services, the main controllable cost is the wage bill, so it stands to reason that public bodies have had to consider ways to reduce it, including the use of ‘early departures’ or what you might more commonly hear described as redundancies, voluntary exits/severance and early retirements. More detail on these different types of early departure can be found within the report that the Auditor General published a couple of days ago.
We identified through a survey of 58 Welsh public bodies that around 10,700 staff had left through early departures between April 2010 and December 2013 at an upfront cost of some £254 million. As far as we know, this is the first time such data has been collated and reported in Wales on a cross-sector basis.
Over time, public bodies stand to save up to £305 million per year through the non-payment of salary, National Insurance contributions and pension contributions to these staff. In times of austerity, such savings can help public bodies balance the books. However, these savings might not be realised in full for a variety of reasons. For example, public bodies may have found that they have since needed to replace employees, or employ temporary staff or consultants, to backfill skills or capacity lost because of early departures. Added to which, savings arising from any early departure will only ever kick-in after an initial payback period, given the upfront investment required.
We did find that staff salary costs had reduced in real terms over the same period, as had headcount. However, it is difficult to know the exact contribution of early departures to this, and many public bodies reported using other methods to help realise savings.
It is likely that public bodies will continue to use early departures to control workforce costs, not least in the context of plans for future local government reform, and our report estimates that there were around 2,300 more early departures in the final quarter of 2013-14. Our report emphasises the importance of good governance and scrutiny of these schemes and the need to align with wider workforce planning.
About the author:
Sophie Knott is a Performance Auditor at the Wales Audit Office, working on national value for money studies. She has worked at the WAO for two years, having previously qualified as an accountant and worked in financial audit at KPMG LLP.