In a meeting of the full council, closed to the public, 19 members voted to let Mr Whitehead retire by April 1998. The decision was opposed by 14 members. A move to defer the vote was quashed.
Unless the district auditor objects, the chief executive will retire with nearly 10 years added to his pension. The cost of the package will be offset by savings on salary, car allowance and medical insurance, according to council sources.
'Mr Whitehead has now taken the opportunity to 'bow out' following the implementation of a top management review,' the council said in a statement this Wednesday.
The council claims the tribunal case is between South Northamptonshire and Mr Newton, and that Mr Newton is simply contesting the accuracy of evidence given to the council concerning his conduct.
Mr Newton was summarily dismissed in 1996. The industrial tribunal case, which Mr Newton is bringing against the council for unfair dismissal, is due to conclude in early June.
'The council has at no stage made a decision that Mr Whitehead and Mr Newton should both leave the council's service as a result of events connected with the disciplinary process surrounding Mr Newton's dismissal,' according to the council's statement.
Finance chair Philip Pettit, who voted against Mr Whitehead's early retirement, said: 'I think these issues include questions of public probity and integrity which go to the very heart of local government and for these reasons I should prefer to see any package deferred until the industrial tribunal has been able to offer its independent assessment.'
Mr Newton was suspended in October 1995, along with his secretary, who was subsequently reinstated. He was dismissed for gross misconduct in January 1996, after a hearing in which Mr Whitehead was the principle witness.
He appealed and in June 1996 was reinstated. But Mr Newton never returned to work because within a month he had been dismissed again, without a formal hearing.