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‘Serious errors’ made in calculating council redundancy payments

‘Serious errors’ made in calculating council redundancy payments

🕔25.Jan 2013

Council HouseA desperate bid by Birmingham City Council to axe jobs saw serious errors in calculating redundancy payments, with staff receiving too much money, others getting too little, and some even banking large lump sums when they weren’t being made redundant.

In one case an employee taking voluntary redundancy was overpaid by £7,500 after his severance package was calculated for someone else with the same name. He was allowed to keep the money.

Auditors discovered numerous mistakes between 2010 and 2012 while the council was trying to reduce its workforce by about 5,000. A sample trawl found 35 employees who had received redundancy payments in error – they were still working for the council.

One person was paid £20,000 by mistake. The council only managed to recover £10,000.

Details of the errors are contained in financial reports that are up to two years old and have been confidential until now. They were presented to a meeting of the governance and resources scrutiny committee, where members said they were concerned about the mistakes.

The auditors discovered:

  • Council staff receiving lump sum payments without deduction of tax and national insurance.
  • Employees being made redundant but receiving no money because they had been “left off the list”.
  • Staff being made redundant, re-hired by the council later in the year and asked to re-pay their cash lump sums.

The first audit report was compiled in 2010-11, just as the council was coming to terms with unprecedented local government spending cuts. Finance experts found a “high error rate” in samples of redundancy payments.

The second report looked at the following year, 2011-12, and uncovered redundancy payments to staff who left the council temporarily and were then re-employed. The payments should have been clawed back, but this did not always happen.

A sample of six redundancy letters found four incorrect payments.

Bill Fletcher, assistant HR director at the council, said the pressure on officials to process redundancy payments had been unprecedented. Managers failed to grasp the scale of what was happening.

Committee chairman Carl Rice asked whether a “lack of political direction” by the city’s former Tory-Liberal Democrat coalition had been a contributory factor in the rush to process redundancies. Claire Ward, HR business partner at the council, agreed that was the case.

However, Ms Ward added: “The audit report identified a number of areas where we didn’t do very well. A number of people slipped through the net and we have put in place processes to make sure it doesn’t happen again.”

Details of the errors were revealed shortly after it was confirmed that redundancies among accountancy staff forced the council to pay £800,000 to private consultants in order to complete the city’s 2010-11 accounts.

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