Date published: 13 July, 2026
Date last updated: 18 August, 2026
Workforce

Guidance on the processes for making exit payments

NHS England guidance for NHS trusts, NHS foundation trusts and integrated care boards on the processes for making exit payments.

Updated June 2026

1. Purpose of this guide

1.1 This guidance sets out the processes NHS England requires NHS trusts, NHS foundation trusts and integrated care boards (ICBs) to follow when proposing and agreeing exit payments. The guidance aims to ensure appropriate governance to protect the reputation of the NHS and ensure probity and value for money.

1.2 It describes the processes to be adopted and the governance framework for chairs, chief executives, HR directors/chief people officers and remuneration committee (or equivalent) members to follow in making severance payments.

1.3 This guidance updates and replaces the previous NHS Trust Development Authority (NHS TDA) guidance dated June 2014.

2. Scope

2.1 This guidance applies to:

2.1.1 All exit payments (contractual and non-contractual) to chief executives and directors of NHS trusts.  For these purposes “director” means any director reporting to the chief executive whether or not an executive member of the Board.

2.2.2 Non-contractual exit payments of any value, to all staff in NHS foundation trusts and NHS trusts and ICBs (including to chief executives and directors as defined in 2.1.1).

2.2.3 Contractual exit payments (as defined in section 2.2 below) of £150,000 or above to all staff in NHS trusts.

2.2.4 All contractual redundancy payments (for any amount) to all staff in ICBs and additionally for ICBs any contractual PILONs (Pay in Lieu of Notice) above £50,000.

2.2 Exit payments cover all payments made on the termination of employment, both contractual and non-contractual (and whether or not covered by a settlement agreement), that are greater than salary due and any unpaid annual leave at the point of termination. This therefore includes but is not limited to:

  • contractual payments such as redundancy payments (including statutory redundancy) and early retirement provisions which include an employer payment (including early retirement in the interests of the efficiency of the service as currently set out in sections 16.29-31 of the Agenda for Change (AfC) handbook)
  • non-contractual payments or arrangements such as, compensation payments, settlement payments in excess of statutory or contractual entitlement, periods of garden leave/special leave, outplacement or training costs where undertaken after termination, write off of any outstanding loans and any other financial arrangements agreed as part of the termination arrangements
  • PILONs which may be contractual or non-contractual, depending on individual contracts

2.3 This guidance does not apply to staff who choose to retire early and access their NHS pensions without the requirement for the employer to enhance the pension in any way.

2.4 This guidance also does not apply to:

  • contractual severance payments, including PILON (any amount) for all staff in NHS foundation trusts
  • contractual severance payments of up to £150,000 for staff that are not chief executives or directors (as defined in 2.1.1) in NHS trusts
  • contractual PILON payments of up to £50,000 for staff in ICBs  

2.5 However, NHS foundation trusts, NHS trusts and ICBs should ensure tht such payments are considered and approved by their local remuneration committee and audit scrutiny is undertaken where appropriate.

2.6 NHS foundation trusts, NHS trusts and ICBs should note that there is separate NHS England guidance and process for approval of Mutually Agreed Resignation Schemes (MARS) and cases.  This can be accessed from the following link: NHS England » Severances.

3. Background and key documents

3.1 On 1 November 2007 David Nicholson wrote to chairs and chief executives of NHS trusts in England clarifying the processes to be followed to terminate contracts of employment of chief executives and/or directors.  This letter can be accessed here: Approval process for making severance payments to very senior managers – GOV.UK. The role of SHAs in this letter has, since April 2013, been devolved to NHS England.

3.2 The NHS Trust Development Authority published the last detailed guidance on severances specifically for NHS trusts back in June 2014. This new guidance brings this up to date, not only for NHS trusts but also to now include NHS foundation trusts and integrated care boards.

3.3 NHS England has the role of ensuring the best use of public money in NHS foundation trusts, NHS trusts and ICBs and of protecting the reputation of the NHS. Its remit in respect of the severance payments referred to in Section 2 of this guidance, is to ensure consistency, equity and probity in the use of public funds and for NHS England to take a system-wide view of the implications of such requests.

3.4 This guidance clarifies the processes that NHS foundation trusts, NHS trusts and ICBs should follow in proposing severance payments to enable any severance cases to be reviewed by NHS England in a timely manner.

3.5 The documents as listed in section 9 are also of relevance and should be considered.   

4. Principles for severance payments

4.1 It is essential that robust corporate governance is followed and that all NHS organisations are able to demonstrate probity, and value for money in any proposed severance arrangements.

4.2 It is NHS England’s expectation that NHS foundation trusts, NHS trusts and ICBs will follow their local capability or disciplinary procedures where applicable and any severance payments will therefore be exceptional or related to a redundancy where the employee in question is eligible for a redundancy payment under their relevant terms and conditions, including where there is no suitable alternative employment. In particular, any performance or conduct issues should be handled in a timely manner via local procedures rather than by a severance payment.  Please also refer to paragraph 4.13.

4.3 Notice periods should be worked to ensure that the NHS receives benefit and to ensure the best use of public money during an individual employee’s notice period. Therefore, PILONs should only be made in exceptional circumstances (e.g. illness) where it is not considered appropriate for notice to be worked and must be supported by a clear business case that demonstrates the equity and cost effectiveness of the proposal. 

4.4 Any PILON paid to an individual employee should be subject to usual deductions for income tax and National Insurance contributions.  There may also be an obligation to deduct tax and National Insurance in order to comply with HMRC rules relating to Post Employment Notice Pay (PENP).

4.5 Where contracts do include PILON clauses, these should be carefully worded to make clear that it is only the employee’s salary that will be paid in lieu and not any other financial terms of employment.

It will not normally be acceptable to allow a period of garden/special leave when the individual is paid but not required to work. Further advice should be sought if it is considered that garden/special leave is necessary in the circumstances.

4.6 Employers should always consider suitable alternative employment before dismissing an employee for redundancy.  NHS England expects NHS foundation trusts, NHS trusts and ICBs to make every effort to redeploy staff whose posts become redundant.

4.7 When contractual redundancy payments are proposed, NHS England will require NHS trusts and ICBs to submit evidence of the steps that have been taken to find suitable alternative employment.  This includes searching for suitable alternative employment in the local health economy or wider as appropriate for the individual staff members. It is therefore not usual for PILON to be offered when terminating a contract on the grounds of redundancy as this foreshortens the period of search for suitable alternative employment. 

4.8 Staff members should also be made aware that if they unreasonably refuse an offer of suitable alternative employment, they may become ineligible for a redundancy payment (paragraph 16.36, Section 16, of the NHS terms and conditions of service handbook refers).

4.9 Severance payments in excess of or outside of statutory or contractual entitlements, or payments which are novel and/or contentious and/or potentially repercussive, should be exceptional and will require NHS England and HM Treasury approval. This is outlined both in HM Treasury guidance, Managing Public Money (Annex 4.13) and also HM Treasury guidance on Public Sector Exit Payments. These can be accessed from the following links:

4.10 Examples of payments that may be considered novel or contentious or potentially repercussive include but are not limited to: settlement payments in excess of contractual notice, compensation for loss of office payments, offers of paid consultancy work, outsourced training/course paid for by the NHS trust, NHS foundation trust or ICB and undertaken after termination. In some cases, such arrangements may be less costly than the contractual entitlement and may represent good value for money, however, if non-contractual will still require HM Treasury approval. 

4.11 NHS foundation trusts, NHS trusts and ICBs should always seek proper legal and audit advice to ensure that any proposals bear internal and external scrutiny and are compliant with both National Audit Office and HM Treasury guidance.

4.12 Where Remuneration Committee approval is required, this should not be substituted by Chair’s action unless there are exceptional circumstances, which the organisation should be able to evidence as required.

4.13 While value for money will be an important consideration, legal advice that a particular severance payment appears to offer good value for the employer may not be conclusive as it may not take account of the wider public interest.  It may be more appropriate to take the case to formal proceedings to demonstrate that the NHS does not reward poor performance, failure, dishonesty, inappropriate behaviour or any form of misconduct.  This is also in line with HM Treasury guidance for agreeing special severance payments.  Implementation of robust internal HR procedures and defending employment tribunal claims ensures proper scrutiny and may act as a deterrent and set a precedent to reduce future claims and costs.  Special severance should not be used as an option to avoid management action, disciplinary processes, or reputational damage. See section 3 of HM Treasury Public Sector Exit Payments Guidance on Special Severance Payments – GOV.UK.

4.14 Whilst it is important to ensure that relevant internal procedures and processes are followed, and appropriate advice taken, it is also important to act in a timely way to avoid unnecessary delays (which can lead to further claims and higher payments).

4.15 Clawback or non-payment of all or part of the payment will apply in the following cases if a new NHS role is found within the following time-frames:

  • Compulsory redundancy
    • Agenda for Change staff – 4 weeks (as per section 16.26 of NHS Terms and Conditions Handbook, before payment is made the employee will certify that:
    • ‘they had not obtained, been offered or unreasonably refused to apply for or accept, suitable alternative health service employment within four weeks of the termination date and they understand that payment is made only on this condition and undertake to refund it if this condition is not satisfied.’
    • VSM staff 12 months (see link on page 14 to the NHS Standard Contract, refer to section 5.18, pages 10 and 11)
  • MAR schemes – 6 months as per guidance: NHS England » Severances.
  • During what would have been the employee’s notice period if a PILON was made.

5. Governance arrangements for agreeing severance payments

5.1 For chief executives and directors (any contractual and non-contractual payment)

5.1.1 NHS trusts considering the termination of the employment of their chief executive or a director (as defined in 2.1.1) should seek guidance from their regional director of workforce at an early stage, prior to obtaining approval of the NHS trust’s local remuneration committee, to ensure that all appropriate factors are considered.

5.1.2 All cases relating to the severance pay arrangements of chief executives or directors must first have been approved by the NHS trust’s local remuneration committee, with appropriate legal advice being obtained. Cases should then be submitted to the relevant NHS England regional Workforce Training and Education (WTE) team, to seek Regional Leadership Appointments Group (RLAG) approval on the NHS trust’s behalf.  Contact details for regional WTE teams can be found on p15.

5.1.3 Each NHS England RLAG will need to see clear evidence to support the severance case. If the case is a conduct or performance issue, the evidence must demonstrate why local disciplinary or capability procedures are not appropriate for resolving the situation. Poor performance or conduct should not be rewarded, and it is unlikely that such cases will be viewed favourably. Every case must demonstrate that it represents good value for money and is in the public interest.

5.1.4 Refer to Annex H for a summary of the approval process.

5.2 For contractual severance payments to other staff

5.2.1 As set out above, this guidance does not apply to contractual severance payments in some circumstances, namely:

  • Contractual payments made to employees of NHS foundation trusts
  • Where contractual payments are up to £150,000 for staff that are not chief executives or directors in NHS trusts
  • Where contractual PILON payments are up to £50,000 or contractual redundancy payments are up to £100,000 for staff in ICBs.

5.2.2 Where NHS trusts or ICBs are proposing only contractual payments above the relevant levels outlined in section 5.2.1, these will usually be considered and approved by their NHS England RLAG without reference to HM Treasury if it is satisfied with the merits of the case and there are no non-contractual elements proposed, namely:

  • For NHS trusts, any contractual severance payment to a chief executive or a director; or if the payment exceeds £150,000 for other staff.
  • ICB compulsory redundancy payments above £100,000; or where there are 10 or more redundancy cases at any change process stage; or if a PILON payment is over £50,000.

5.2.3 For approval of contractual redundancy payments, NHS trusts and ICBs should complete and submit to their regional WTE team, the business case template (Annex A) and job search record template (Annex B) which should detail the efforts being made to search for suitable alternative employment, including in neighbouring NHS organisations.  Regional WTE teams will then seek RLAG approval on the NHS trust or ICB’s behalf.

5.2.4 Before NHS trusts, foundation trusts and ICBs make any redundancy payments, employees must certify, ‘they had not obtained, been offered or unreasonably refused to apply for or accept, suitable alternative health service employment within four weeks of the termination date and they understand that payment is made only on this condition and undertake to refund it if this condition is not satisfied,’  as per paragraph 16.36 (Section 16), of the NHS terms and conditions of service handbook.

5.2.5 NHS trusts and ICBs should be aware that where payment of all or part of the notice period is included in the proposal, notice periods in excess of 6 months for staff at chief executive and director level and in excess of 3 months for all other staff will be potentially considered novel and contentious. This relates to a change to the NHS Health Service Act 2006: NHS Bodies Employment Contracts (Notice Periods) Directions 2008, restricted notice periods in new contracts to a maximum of 6 months.

5.2.6 Notice of termination (on the grounds of redundancy) should not be served until NHS England has approved the redundancy payment.

5.2.7 Refer to Annex H for a summary of the approval process.

5.3 The search for suitable alternative employment when managing compulsory redundancies

5.3.1 Where contractual redundancy payments are proposed by NHS trusts or ICBs, NHS England RLAGs will also require evidence of the steps that have been taken to find suitable alternative employment.

5.3.2 When considering cases for compulsory redundancy, NHS England RLAGs will be particularly concerned to see that a genuine search for suitable alternative employment has taken place. NHS trusts and ICBs are advised to ensure that individuals searching for suitable alternative employment and/or their HR advisers complete Annex B in full.

5.3.3 Where few or no alternative posts have been identified for application, it is particularly important that a comprehensive account is given of the search that has been undertaken.  In addition, individuals should continue to search for suitable alternative employment during any trial periods so that should the trial period fail, a search record can still be demonstrated.

5.3.4 To ensure that the criteria in section 16 of the AfC handbook is met, NHS trusts and ICBs are advised not to make any redundancy payment until 4 weeks after the termination date and at that point only after receipt of written assurance from the individual that no suitable alternative employment has been offered before termination or commenced in the 4 week period since termination.

5.4 For non-contractual severance payments to all staff (Special Severance Payments)

5.4.1 All non-contractual severance payments for staff at any level, by NHS foundation trusts, NHS trusts, or by ICBs, require either Department of Health and Social Care (DHSC) or HM Treasury approval.

5.4.2 In accordance with HM Treasury Special Severance Guidance (November 2025), Departmental Accounting Officers, i.e. DHSC, have the authority to approve special severance payments under £300,000. Cases that exceed this figure, are deemed to be novel or contentious, or where the employee earns over £174,000 will additionally require approval from HM Treasury.   

5.4 3 Prior approval (NHS trusts and ICBs) and support (NHS foundation trusts) from NHS England RLAGs should be sought when proposing to make any special severance payments which are non-contractual, or considered novel, unusual or contentious. 

5.4.4 Approval should be sought from the relevant NHS England RLAG via completion and submission of HM Treasury’s pro forma for Special Severance Business Cases (see Annex C).  The completed pro forma should include a robust and detailed summary of lessons learnt which HM Treasury will be particularly interested to see.  NHS England may wish to follow up on actions taken by the organisation, to address the lessons learnt.  Completed forms should be submitted to the following email addresses:

  • NHS trusts, NHS foundation trusts, and ICBs should contact their regional Workforce, Training and Education team (please see contact details (link to section 10).

All ICB cases and those NHS trust cases where non-contractual payments are £150,000 or above, will additionally require NHS England Executive HR group approval.

5.4.5 The regional WTE team will then seek DHSC/HM Treasury approval on behalf of the NHS foundation trust, NHS trust or ICB.  No payment should be made prior to this approval being received.  NHS England will only be able to confirm approval subject to DHSC/HM Treasury approval.

5.4.6 As set out in HM Treasury guidance, non-contractual payments on termination should be exceptional and made only where a payment is in the public interest and represents value for money. HM Treasury has made it clear that it “cannot approve special severance payments that reward, or will be seen to reward, failure, dishonesty or inappropriate behaviour.” Therefore, NHS foundation trusts, NHS trusts and ICBs should note that cases which are considered to be rewarding the above are very unlikely to be approved.  Whilst there may be value for money in making the non-contractual payment, the case would need to be considered in the context of the wider public sector.  Alternative options (such as following internal processes and/or robustly defending employment tribunal claims) may act as a deterrent or set a precedent to reduce future claims and costs.

5.4.7 Any non-contractual payments made without the necessary approvals may result in the accounts of NHS foundation trusts, NHS trusts and ICBs being qualified.  NHS England’s accounts may also be qualified as a result of the necessary approvals not being in place.

5.4.8 Any NHS foundation trust, NHS trust or ICB proposing a non-contractual severance payment that contains compensation for future earnings, should consider including a provision requiring the repayment of part of the severance payment where an employee returns to work for the NHS in England within twelve months and/or before the expiry date of the period for which they have been compensated (as measured in equivalent months/part-months of salary). In such circumstances the employee should be required to repay any un-expired element of his/her compensation. This would be reduced to take account of any appointment to a lower grade post or reduced hours basis and reflect net salary. 

5.4.9 Refer to Annex H for a summary of the approval process.

5.4.10 Other types of special payments (not special severance payments) above £95k – and those of any value that may be considered novel, contentious or repercussive – require approval as explained in our letter of April 2021. The mailbox for these matters is england.assurance@nhs.net . If there is one decision that covers multiple individual payments, then this should be assessed collectively in terms of the £95,000 threshold.

5.4.11 These requirements in 5.4 also apply to subsidiaries that are controlled by the NHS body.

6. Voluntary redundancy schemes

6.1 Background and criteria for approval

6.1.1 Any form of voluntary redundancy or severance scheme must firstly be approved by HM Treasury and then delegated to DHSC, by HM Treasury, annually (for each financial year). NHS trusts, NHS foundation trusts and ICBs are required to seek NHS England RLAG approval ahead of running any voluntary redundancy schemes.

6.1.2 Approval of voluntary redundancy schemes will be based on the following criteria:

  • that funding is available for the scheme and that the scheme provides value for money
  • that the payback period does not exceed two years
  • that all the legal requirements for redundancies and terms as per Section 16 of AfC will be adhered to (e.g. the role(s) in question are genuinely in scope for redundancy, consultation process and ‘clawback’ of payments – see clause 12 in VR scheme template, Annex F)
  • that applicants for the scheme are not from staff groups where there is a known shortage, and no-one will be allowed to leave if this would  put the relevant service at any potential risk
  • that there will be no staff member leaving under the scheme who should otherwise be managed under the organisation’s performance/capability/disciplinary procedures
  • that audit scrutiny will be undertaken pre/post process
  • that appropriate legal advice will be taken where necessary regarding individual voluntary redundancies

6.1 3Any scheme that acts outside of the above criteria will be treated as a special severance payment and require NHS England Executive HR Group and HM Treasury approval.  Advice from NHS England regional WTE teams should be sought if this is to be considered.

6.1.4 PILON should only be offered in very exceptional circumstances and in any case, only where there is a contractual term allowing so. 

6.2 Process for approval of voluntary redundancy schemes

6.1.1 NHS trusts, NHS foundation trusts and ICBs should first seek approval for the scheme from their trust board and remuneration committee.

6.1.2 Formal NHS England approval can then be sought via submission of a completed checklist (see Annex D) along with submitting a copy of the proposed scheme to regional workforce training and education teams.

6.1.3 A national VR scheme will be approved by HM Treasury each financial year and delegated to NHS England (via DHSC) to scrutinise and approve every local scheme proposed. A template VR scheme has been provided which is the standard model scheme that NHS England will consider for approval (see Annex F) Schemes which do not follow the model guidance will require individual approval by HM Treasury by completion of Annex C.

6.1.4 When leavers are known please complete Annex G which should be submitted to your Regional, Training and Workforce Teams to approve.

6.1.5 Refer to Annex H for a summary of the approval process.

6.1.6 Approvals of all payments up to £300,000 should be obtained from Regional Workforce, Training, and Education teams. Any payments above £300,000 will require additional NHS England Executive HR Governance Group (EHRG) and HM Treasury approval. HM Treasury have confirmed that any payment made under the terms of this scheme up to £300,000 can be approved through delegations that they have made. Any payments which fall outside of the terms of the scheme may be deemed a special severance payment, defined in Managing Public Money, and require additional approvals by completion of Annex C.

7. Settlement agreements

7.1 Where settlement agreements are proposed, it should be ensured that such agreements are justified and that they are drafted in such a way as not to prevent proper public scrutiny either by NHS England, Department of Health and Social Care, or external auditors. 

7.2 Particular attention should be paid to the advice in Health Service Circular 1999/198 which states that NHS trusts should prohibit the use of “gagging” clauses in contracts of employment and settlement agreements which seek to prevent the disclosure of information in the public interest. 

7.3 Reference should also be made to NHS Employers’ updated guidance on “the use of settlement agreements and confidentiality clauses” (29 May 2024) which all employers must follow. This includes a model clause regarding confidentiality, which employers must use, namely:

Permitted disclosures

Nothing in this Agreement prevents the parties from making a disclosure

a) which amounts to a protected disclosure within the meaning of s43A of the Employment Rights Act 1996;

b) in order to report an offence to a law enforcement agency or to co-operate with a criminal investigation or prosecution;

c)  for the purposes of reporting misconduct or a serious breach of regulatory requirements to any body or organisation responsible for supervising or regulating the matters in question;

d)  if and to the extent required by law, and;

e) to the Equalities and Human Rights Commission. 

All other terms of this Agreement are to be read subject to this clause.

7.4 Where payments for any part of the notice period, including salary in lieu of notice are proposed, settlement agreements must include a clawback clause for any work obtained in the NHS during what would have been the notice period.

8. Employment tribunal awards and settlements

8.1 The process for managing non-contractual severance payments includes any payments proposed (as described above) which have not been awarded by an employment tribunal, or any other court of law resulting from a civil action arising from an employment relationship. If an NHS foundation trust, NHS trust or ICB loses an employment tribunal case, any award ordered by the employment tribunal or other court of law will not require NHS England or DHSC/HM Treasury approval. 

8.2 In the event that a settlement is proposed between the parties in the period between the employment tribunal judgment and the formal remedy hearing, any proposed settlement payment would still need NHS England and DHSC/HM Treasury approval if it would be considered to be a non-contractual severance payment.

8.3 The process for approval for non-contractual payments (as per section 5.4) should also be used for any settlements proposed, after termination but prior to or during the employment tribunal process and other types of alternative dispute resolution such as COT3 agreements which include non-contractual terms or settlement proposed by way of mediation or judicial mediation. Any such settlements proposed should specifically state that they are subject to NHS England and DHSC/HM Treasury approval. No binding settlement agreements should be entered into unless and until such approvals have been granted.

8.4 Payments made to settle employment tribunal claims brought by staff who continue to be employed (such as in respect of injury to feelings caused by unlawful discrimination) are not considered to be severance payments.

9. Relevant documents to be considered

9.1 The following documents are also of relevance and should be considered:

10. Contact for further advice and submission of cases

Advice on the implementation or any aspect of this guidance is available from:

Regional Workforce, Training and Education teams:

NHS Employers contacts:

Annexes

Date published: 13 July, 2026
Date last updated: 18 August, 2026