NHS redundancy rules leave partially retired workers facing thousands in lost payments

Hundreds of NHS workers who have taken partial retirement could receive significantly lower redundancy payments because of the way their length of service is calculated, according to UNISON.

The issue centres on “reckonable service” – the period of NHS employment used when calculating contractual redundancy payments.

Under NHS redundancy arrangements, employees normally need at least two years of continuous NHS service to qualify for a contractual redundancy payment. Payments are calculated using reckonable service, subject to the rules contained within NHS terms and conditions.

However, where an employee has taken partial retirement and NHS service has already been taken into account when calculating pension benefits now being paid, that period of service cannot generally be counted again towards their contractual redundancy payment.

This can effectively mean that, for redundancy purposes, an employee’s reckonable service starts again from the point at which they took partial retirement.

The issue has become increasingly significant as NHS organisations face workforce reductions and employees who have spent decades in the health service discover that their potential redundancy entitlement may be considerably lower than expected.

UNISON highlighted the case of one anonymous NHS worker who had completed 35 years of service before taking partial retirement in 2024. The worker subsequently discovered, after their job became at risk, that taking partial retirement had affected the service that could be included in their redundancy calculation.

The union says hundreds of NHS employees could face reductions worth thousands or, in some cases, tens of thousands of pounds.

Partial retirement was introduced into the NHS Pension Scheme in October 2023. It allows eligible staff to take between 20% and 100% of their pension benefits while continuing to work and build further pension benefits. Employees must reduce their pensionable pay by at least 10% for the first 12 months after taking partial retirement.

The arrangement was designed to provide greater flexibility for experienced NHS staff approaching retirement, allowing them to reduce their working commitments while remaining in the workforce.

The government has previously confirmed that taking partial retirement does not make an NHS employee ineligible for redundancy payments. However, it acknowledged in a Parliamentary answer in February that partial retirement can change how contractual redundancy payments are calculated.

UNISON is now calling for changes to protect workers’ length of service when calculating redundancy payments.

Alan Lofthouse, UNISON deputy head of health, said workers had taken advantage of pension flexibilities believing they could reduce their hours while continuing their NHS careers, but some were now discovering the implications for redundancy payments.

The union argues that staff should have been made clearer about the potential consequences when deciding whether to take partial retirement and says flexible retirement arrangements remain important for retaining experienced NHS employees.

The issue is particularly significant for long-serving staff who took partial retirement before subsequently finding themselves at risk of redundancy, as years or even decades of earlier NHS service may no longer form part of the calculation for their contractual redundancy payment.

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