Legislation is to be introduced as soon as possible to cap redundancy payments to civil servants, the government has announced.
Cabinet Office minister Francis Maude said the decision to legislate had been taken “with reluctance”, adding that it had become necessary because of the current economic climate.
He also blamed legal action against the previous Labour government by the Public and Commercial Services union, which won a High Court ruling that changes to the Civil Service Compensation Scheme was unlawful.
A bill will be introduced to limit the cost of future redundancy payments by capping all compulsory redundancy pay-offs at 12 months’ pay and limiting amounts for voluntary severance to 15 months’ salary.
The Cabinet Office said the move was aimed at bringing Civil Service payments in line with the best practice in the private sector.
Mr Maude said: “Our ambition now is that a negotiated, sustainable and practical long-term successor to the existing scheme can be agreed - one that is flexible and appropriate for current economic climate and also fair for lower paid workers.”
The government said accrued pension rights would not be affected by the new legislation, adding that it wants to negotiate with unions.
Mr Maude said he hopes to agree a permanent and sustainable new scheme with all the unions which is “appropriate to the times”, but also gives additional protection to lower paid civil servants.
Under the current scheme, some long-standing employees are eligible for a package worth more than six years of pay, he said.
The PCS has warned it will use all means at its disposal to resist moves by the coalition administration to target payments to public sector employees who are laid off as spending cuts bite.