The BBC payouts furore has highlighted the importance of ensuring that severance payments remain within contractual terms.
The broadcaster’s Trust Chairman Lord Patten and Director General Lord Hall were called before the Public Accounts Committee because of widespread concerns that more than £25m was paid to 150 people leaving the corporation.It follows a critical report by the National Audit Office (NAO) on the scale of the payments. The NAO was asked by the BBC Trust to look into the issue following adverse publicity about payments to senior executives leaving the broadcaster.
The report found a quarter of the payments it looked into were higher than contractually required.They included payments to the BBC’s ex-Director General George Entwistle, who received £475,000 after resigning in November last year. The total included three weeks’ salary of £25,000, which was over and above his severance package of £450,000. Former BBC Deputy Director General Mark Byford received £949,000, of which £73,000 was paid for leave he had not taken.
The Public Accounts Committee heard from the BBC’s HR director Lucy Adams, who told MPs that the high payments had been part of the Corporation’s “custom and practice”, with the focus on getting senior executives who were leaving to do so as quickly as possible.
The BBC is currently consulting with its staff about future redundancy settlements. Up for discussion is a cap of £150,000 or 12 months’ salary – whichever is the smaller amount.
The BBC case has attracted so much publicity because the broadcaster is publicly funded through the TV Licence fee. However, it has wider repercussions and serves as an important reminder to companies – especially those with shareholders – to ensure their severance payments to executives remain within contractual terms.