BBC severance packages - Public Accounts Committee Contents

1  BBC severance policy and practice

1. The creative talents of the many thousands of people who work for the BBC have helped maintain its reputation as the world's leading public service broadcaster. However, during our examination of the severance package awarded to the BBC's former Director General, George Entwistle, we became increasingly concerned about the scale of severance pay for other senior managers and the impact of this on public trust in the BBC.[1] We therefore recommended that the National Audit Office carry out a review. The National Audit Office examined an initial sample of 60 severance payments in the three years to December 2012,[2] before extending its review to include all severance payments to senior BBC managers during this period.[3]

2. In the three years to December 2012, the BBC spent £25 million on severance pay for 150 departing senior managers.[4] The BBC told us that the significant number of severance payments during this period reflected the steps it took to reduce senior manager numbers, from 624 in March 2010 to 445 in March 2013.[5] The BBC estimates that reducing senior manager numbers resulted in a cumulative saving of £35 million in the three years to December 2012.[6]

3. In 22 of the 150 severance cases in the three years to December 2012, the BBC paid more salary in lieu of notice than it needed to, at a cost to licence fee payers of £1.4 million.[7] For example, the BBC paid its former Deputy Director General, Mark Byford, around £500,000 more salary in lieu of notice than it needed to.[8] The BBC announced in October 2010 that it would make Mr Byford redundant. However, it chose to delay giving Mr Byford his formal notice until he left in June 2011, so that he could receive his maximum entitlement of 12 months' salary in lieu of notice. In practice, Mr Byford was given eight months' notice and the BBC need only have paid him the shortfall of four months' pay in lieu of notice.[9] The BBC's former Director General, Mark Thompson, told us that the BBC agreed to pay Mr Byford the extra eight months' pay in lieu of notice, worth around £500,000, to keep him "fully focused" instead of "taking calls from head-hunters".[10] Mr Byford received more than £1 million when he left the BBC.[11]

4. The BBC claimed that it had been 'custom and practice', but not a legal requirement, to add salary in lieu of notice to departing managers' standard redundancy entitlement, regardless of whether they worked their notice.[12] However, this was not applied consistently. Of the 150 senior managers who received severance pay in the three years to December 2012, 62 received payments equivalent to the BBC's standard redundancy policy and 17 received less.[13]

5. The BBC included other types of non-contractual payments in some severance packages. For example, it included £49,000 for training and equipment in a severance package to improve a departing manager's career prospects; in another case it committed to purchasing at least £60,000 of consultancy services from a departing manager.[14] One senior manager who was working on a part-time basis had their severance payment calculated on a full-time basis.[15]

6. The BBC's severance arrangements allowed departing managers to receive large payouts even if they had had secured job offers before leaving the BBC.[16] For example, the BBC agreed to pay severance to a senior manager who had a job offer, on the basis that if it did not do so it would cost more to remove him if his post was subsequently made redundant. This individual subsequently elected to repay his severance payment on learning of deficiencies in the way the payment had been authorised.[17] The BBC has not asked any senior managers to return non-contractual payments on the grounds that it has no legal grounds to do so.[18]

  1. The BBC attributed the payment of non-contractual 'sweeteners' to a prevailing culture where offering generous payouts was considered to be a good way of managing severance cases.[19] Lord Hall, who took up post as Director General of the BBC in April 2013, concluded that the BBC had 'lost the plot'.[20] He announced on his second day in post that he would tackle the issue of severance pay and subsequently announced that he would cap individual severance payments at £150,000. Severance payments in excess of £75,000 must now be approved by the BBC's Senior Management Remuneration Committee. The BBC is also removing the use of payment in lieu of notice on the grounds that senior managers should work their notice and then leave.[21]

1   Committee of Public Accounts, British Broadcasting Corporation: Off-payroll contracting and severance package for the Director General, Twenty-second Report of Session 2012-13, HC 774, December 2012. Back

2   C&AG's report, Severance payments and wider benefits for senior BBC managers: Report by the Comptroller and Auditor General presented to theBBC Trust Finance Committee, July 2013  Back

3   C&AG , Severance payments for senior BBC managers: supplementary note September 2013 Back

4   Q 96 Back

5   Qq 203, 233, C&AG's report July 2013 Figure 6 Back

6   Qq 95, 168, 210 Back

7   C&AG report, Severance payments for senior BBC managers: supplementary note September 2013 Back

8   Q 215 Back

9   Qq 8, 17, 22, 65, 249, 313, 318 Back

10   Qq 216, 220 Back

11   Q 65 Back

12   Qq 80-83, 241-251 Back

13   Q 126 Back

14   Q 95 Back

15   Q 136-7 Back

16   Q 129-33 Back

17   Qq 107-110, 147, 374 Back

18   Qq 134-135, 149 Back

19   Qq 81-82, 383, 389 Back

20   Qq 196-8 Back

21   Qq 170-1, 183, 206 Back

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© Parliamentary copyright 2013
Prepared 16 December 2013