Health and Personal Social Services: Executive Directors' Contracts and Termination Settlements

The Assembly's independent auditor, Mr John Dowdall, has today published a report on:

  • the results of his review of settlements made in recent years to former Executive Directors of Health and Social Services Trusts and Boards, whose contracts were terminated; and
  • his examination of the employment practices and procedures in respect of Executive Directors employed throughout the Health and Personal Social Services (HPSS).

Main Findings

On Termination Settlements (Part 3 of the Report)

Termination settlements ranging from £5,750 to £331,000 and totalling £1,030,716 were paid in recent years to eight Executive Directors in three HPSS organisations (two Trusts and one Board). All eight cases are reviewed in detail in the report. The Audit Office found:

  • serious weaknesses in the form and content of these employment contracts (e.g. the use of fixed-term rolling contracts with no termination clauses or clawback provision) which put onerous demands on the employing authority when termination settlements were being negotiated and which did not represent value for money (paragraph 3.43);
  • a lack of control in handling negotiations of termination settlements (paragraph 3.50);
  • instances where, contrary to statutory requirements, no written contracts were in place (paragraph 3.39);
  • a divergence of views, on the part of the Department of Health, Social Services and Public Safety and one Trust, on precisely where accountability lay for the negotiation of the termination of one of these contracts (paragraph 3.33);

The Audit Office accepts that the individual employees in these cases were not responsible for the weaknesses identified in contracts and control. Nevertheless, it considers that there are important lessons to be learned throughout the HPSS from the experiences of the negotiations of these settlements, including the need for:

  • remuneration committees of employing authorities to appreciate the key role that they play in determining the nature of Executive Directors' and Senior Managers' employment contracts to ensure their legal competency and that any termination payments can be fully justified (paragraph 3.78);
  • the Department to be pro-active in making sure that Trusts negotiate employment contracts that ensure value for money on termination and in controlling the termination payments made by Trusts (paragraph 3.78);
  • the Department to review the position of all HPSS bodies to ensure that there is full compliance with current employment legislation (paragraph 3.41).

On Employment Practices and Procedures (part 4 of the Report)

From its examination of employment practices and procedures in respect of Executive Directors, the Audit Office notes that the legal competency of existing rolling contracts is open to question. These contracts could involve substantial costs on termination in the event of any future reorganisation of the HPSS and they do not ensure value for money (paragraph 4.26).

Legal opinion sought by the Audit Office on a number of rolling and permanent contracts also concluded that they were deficient in several areas and suggests that the model contracts offered by the Department in its current guidance require review and revision (paragraph 4.26).

The Audit Office believes that the Department needs to give clear and authoritative advice, to Boards, Agencies and Trusts, on the contractual issues arising from the termination of existing contracts and the negotiation of new contracts. This will be particularly important in any future reorganisation of the HPSS (paragraph 4.27).

Accordingly, the Audit Office recommends that the Department should:

  • provide Boards, Agencies and Trusts, through new guidance, with a new standard permanent employment contract for Executive Directors and Senior Managers, which should deal specifically with the issues of period of notice and termination to avoid the overgenerous settlements that have been made in the past (paragraph 4.27);
  • assess the potential liability arising from the termination of existing contracts (rolling, fixed or permanent) by a review of these contracts, and seek to ensure that the negotiation of any future termination settlements will minimise this cost to public funds (paragraph 4.29);
  • seek the powers to control termination payments made by the Trusts, with a requirement that its approval be sought for any future termination settlements negotiated by the Trusts (paragraph 4.30);
  • take measures to ensure that the cost - benefits of any future early retirements are sound (paragraph 4.31).