HC 296 Public Accounts CommitteeWritten evidence from Network Rail

Further to my appearance before the Public Accounts Committee (the Committee) on 19 June in connection with the above inquiry, I wanted to write with further information on the use of Compromise Agreements by Network Rail (Q89).

First of all, I would like to clarify my initial response to the Committee which, in retrospect, may have misunderstood the information sought by the question. In my response, I assumed that the Committee was specifically interested in Compromise Agreements put in place with former members of the Company’s Executive Director team. However, reflecting on the question and the comparable information I supplied to the Committee two years ago, I imagine that the question may have been seeking a broader illustration of how Compromise Agreements are used across the entire Company. I therefore appreciate this opportunity to provide a full and clear response on the issue.

In my previous letter to the Committee in 2011, I set out the number of Compromise Agreements put in place by the Company between April 2006 and April 2011. It therefore seems most helpful to provide continuity by updating this with comparable information for the period since May 2011.

I confirm that, from 1 May 2011 to date, there have been 105 Compromise Agreements with a total value of £5,707,715.77. During this time, there were no Compromise Agreements for Executive Directors. Five of these Agreements were for Executive Grade Unclassified employees who are effectively the next most senior level of the Company. These five Agreements had a total value of £1,120,433.50. This figure includes (where applicable) redundancy payments, payment in lieu of notice, holiday entitlement, loss of benefits (eg health care, car allowance), incentive awards, and compensation for loss of office or pension contributions.

Not all of the above will apply in each case. Long service and seniority also make a significant difference to individual Agreements as awards are based upon a calculation of loss of earnings for an agreed period plus the loss of benefits and pension entitlements that would have accrued over that time. I wish to clarify that we do not use “ex gratia” payments in our Compromise Agreements.

I fully appreciate that the use and, particularly, potential misuse of Compromise Agreements is an issue of concern to the Committee. It is, however, important to recognise that, in an organisation the size of Network Rail (34,000 employees) that is going through a period of considerable change to our working practices, Compromise Agreements are a means by which two parties can resolve a range of employment differences sensitively and properly.

Legal recourse is, of course, another means of resolution but alternative methods, such as mediation and Compromise Agreements, are important. Indeed, in order to minimise stress to our employees, we seek to resolve any differences or disputes outside the formal tribunal structure wherever possible and appropriate. In order to protect any employee in the process of settling differences, it is also a legal requirement that they have independent legal representation which I can confirm that Network Rail agrees and funds.

I wish to emphasise how important it is to us that, whether via formal or informal processes, we always seek to achieve a resolution that is fair to both the individual and the Company. In some cases, this does involve the use of Compromise Agreements but, given the extent of change taking place at Network Rail, I am confident that the Company’s use of these Agreements has been reasonable and proper.

3 July 2013