Agenda for Change & Redundancy Rights
NHS Settlement Agreements & MARS Calculator: 2026 Rules & Payouts
In 2026, NHS settlement agreements with Special Severance Payments (amounts exceeding statutory or contractual entitlements) must be approved by HM Treasury. Exit packages of £100,000 or more, or for staff earning over £150,000, require Ministerial approval. Under Section 43J of the Employment Rights Act 1996, these agreements cannot restrict your right to whistleblow or report patient safety concerns.
How are NHS redundancy and MARS settlement payments calculated?
Under NHS Agenda for Change Section 16, contractual redundancy pay is 1 month of basic pay per complete year of reckonable service (capped at 24 months, minimum 2 years service). Mutually Agreed Resignation Scheme (MARS) voluntary exits under Section 17 provide 1 month of pay per year up to 21 months. Special Severance Payments require HM Treasury approval, with packages at or above £100,000 requiring Ministerial clearance. The first £30,000 is tax-free under ITEPA 2003 s.403.
NHS Redundancy & MARS Payout Calculator
Estimate your contractual redundancy or voluntary MARS payout under NHS Agenda for Change terms.
Your NHS trust pays £350 to £750 + VAT directly to your solicitor. Free independent review to you.
Understanding your position as an NHS employee
Leaving the NHS after years of dedicated public service is emotionally demanding. When trust management presents a draft settlement agreement or MARS proposal, you might feel pressured to agree quickly.
You hold strong contractual rights under Agenda for Change. You are entitled to take the time you need, verify every calculation, and instruct an independent solicitor of your choice. Your trust is legally required to fund your independent legal review.
Key rules at a glance
- Contractual redundancy under Agenda for Change Section 16 pays 1 month of basic pay per year of service (max 24 months).
- MARS voluntary severance under Section 17 provides up to 21 months of basic salary, with the first £30,000 paid tax-free under ITEPA 2003 s.403.
- Any payment exceeding your contractual or statutory entitlement is a Special Severance Payment requiring HM Treasury approval.
- Exit packages of £100,000 or more, or for staff earning over £150,000, require Ministerial clearance from the DHSC.
- Under Section 43J of the Employment Rights Act 1996, settlement clauses that attempt to prevent whistleblowing or patient safety disclosures are void.
- NHS employers typically provide a £350 to £750 + VAT contribution toward independent legal advice.
What is a Special Severance Payment in the NHS?
These payments are scrutinised because they involve public funds. Common examples include ex-gratia payments and compensation in lieu of notice (often referred to as PILON, which is taxable under Section 402D of ITEPA 2003) where no contractual clause exists. They also include voluntary exit payments that exceed standard Agenda for Change guidelines.
What is excluded: Statutory redundancy pay and contractual Agenda for Change redundancy pay are not Special Severance Payments. Payments ordered by an employment tribunal are also excluded. They do not require the same Treasury approval.
Why NHS settlement agreements require approval
NHS organisations operate under strict financial controls. Other public bodies can approve minor severance payments. NHS employers do not have this flexibility.
Every Special Severance Payment proposed by an NHS trust or foundation trust must be submitted for external approval. The business case must be reviewed by the Department of Health and Social Care and NHS England. It is then sent to HM Treasury for final sign-off.
Because of this multi-stage review, NHS settlement agreements can take several weeks or even months to finalise. Your employer must demonstrate that the payment represents value for money. They must also show they explored other options to resolve the dispute before offering a settlement. You can compare your package against typical private and public sector outcomes in our guide to fair settlement agreements.
The £100,000 threshold
If the total exit package includes a Special Severance Payment of £100,000 or more, it requires Ministerial approval. When calculating the exit package value, your employer must include all elements of redundancy and notice pay. They cannot count only the severance element.
The £150,000 salary cap
Ministerial approval is also required if you earn £150,000 or more. The same applies if you hold a senior management role. This is a hard limit designed to ensure high-value public sector exits are personally authorised by a government minister.
How NHS redundancy affects your NHS Pension
For most NHS staff, the NHS Pension (whether in the 1995, 2008, or 2015 Scheme) is their most significant financial asset. Departing the service raises immediate questions about accrued benefits.
Two key pension choices on compulsory redundancy
Under Agenda for Change Section 16, if you have reached minimum pension age (age 50 for the 1995 section, age 55 for the 2008/2015 sections) and are made redundant, you may be eligible to choose:
Your accrued pension benefits are protected by statute. A settlement agreement cannot forfeit the pension you have already built up. If you are offered a voluntary exit under MARS, early retirement buyout is generally not automatic unless explicitly negotiated. You can check your baseline statutory redundancy entitlement using our redundancy pay calculator, or evaluate unfair selection using our unfair dismissal calculator.
MARS re-employment rules and clawback clauses
Many healthcare professionals worry that accepting a voluntary severance package or MARS exit will permanently bar them from working in the NHS.
Under standard NHS Agenda for Change Section 17 guidelines, you are not permanently barred from NHS employment. However, schemes impose a mandatory break-in-service period (typically 6 months).
If you return to NHS employment (including bank or agency shifts within an NHS trust) within the specified break period, you may be required to repay a proportion of your severance payment. An independent solicitor will examine your draft agreement to verify whether re-employment restrictions are reasonable.
Confidentiality and whistleblowing rights in NHS exits
It is common for NHS settlement agreements to contain confidentiality clauses. These clauses usually prevent you from discussing the terms of the agreement or the circumstances of your departure.
However, the law protects your right to speak out on patient safety and regulatory issues. Your agreement cannot prevent you from making a protected disclosure under Section 43J of the Employment Rights Act 1996. You always retain the right to report patient safety concerns to the Care Quality Commission (CQC), the General Medical Council (GMC), or the Nursing and Midwifery Council (NMC).
Silencing is unlawful: Any clause in a settlement agreement that attempts to stop you from whistleblowing or raising patient safety concerns is void by law.
The 5-stage NHS settlement timeline: what happens next
Knowing what comes next reduces anxiety. Here is the standard progression for an NHS settlement or MARS exit:
Receive draft terms and verify calculations
Check your basic monthly pay and continuous reckonable years against Agenda for Change Section 16 or Section 17 using the calculator above.
Trust prepares business case
Your NHS trust prepares an internal value-for-money justification to submit to NHS England and the DHSC.
External approvals (Treasury / Ministerial)
Any Special Severance Payment or package equal to or exceeding £100,000 undergoes HM Treasury review. This stage can take 6 to 12 weeks.
Independent legal review
You instruct an independent SRA-regulated solicitor. Your NHS employer pays the legal fee contribution (£350 to £750 + VAT) directly.
Agreement execution and payout
Once signed and approved, your exit payment is processed. The first £30,000 is paid completely tax-free under ITEPA 2003 s.403.
Legal fees and choosing your own independent solicitor
To make a settlement agreement legally binding under Section 203 of the Employment Rights Act 1996, you must receive independent legal advice. The solicitor advising you must confirm their advice in writing.
Your NHS employer will normally make a financial contribution toward your legal fees. The standard contribution is between £350 and £750 plus VAT. In most straightforward cases, this contribution covers the full cost of the legal review.
You have the statutory right to choose your own independent solicitor. Your trust HR department may suggest a panel firm, but you are not required to use them. Choosing a specialist employment solicitor ensures your pension, whistleblowing rights, and tax position are fully protected. You can read more about how this works in our guide to employer-recommended solicitors.
Find out where your NHS settlement offer stands
Free calculator. SRA-regulated solicitor matched within 24 hours. Your NHS employer covers the legal fees.
Frequently asked questions
How is NHS redundancy pay calculated under Agenda for Change?
Under Agenda for Change Section 16, redundancy pay is calculated as 1 month of basic pay for each complete year of reckonable NHS service, capped at 24 months. You must have at least 2 continuous years of service. Unlike statutory redundancy, pay is calculated on your actual basic monthly salary with no weekly statutory cap.
What is MARS in the NHS and how is the exit payment capped?
The Mutually Agreed Resignation Scheme (MARS) is a voluntary departure scheme under Agenda for Change Section 17. Payments are typically calculated as 1 month of pay per year of service, capped at 21 months (or a local trust cap). The first £30,000 is tax-free under ITEPA 2003 Section 403.
How does an NHS settlement agreement affect my NHS pension?
Your accrued pension rights are protected by law. Under Agenda for Change Section 16, eligible staff who have reached minimum pension age can choose to use their redundancy payment to buy out the actuarial reduction for early retirement, or take the redundancy payment as a lump sum.
Can I return to work in the NHS after taking a MARS voluntary severance package?
Yes, but there is usually a mandatory break-in-service period. Under standard MARS rules, you cannot return to NHS employment within 6 months of your leaving date without having to repay a proportionate part of your severance payment.
What is a Special Severance Payment in the NHS?
A Special Severance Payment is any sum paid to a departing employee that exceeds their statutory or contractual entitlements. This includes ex-gratia payments and discretionary notice pay, all of which require HM Treasury approval.
Does my NHS settlement agreement need HM Treasury approval?
Yes. NHS organisations have no delegated authority to approve Special Severance Payments. Every such payment requires approval from the Department of Health and Social Care and HM Treasury.
Can an NHS settlement agreement stop me from whistleblowing?
No. Any clause that attempts to restrict your right to make a protected disclosure is legally void under Section 43J of the Employment Rights Act 1996. You always retain the right to report patient safety or whistleblowing concerns.
How much will my NHS employer contribute to legal fees?
NHS employers typically contribute between £350 and £750 plus VAT toward your legal fees. This is paid directly to your chosen independent solicitor once the agreement is signed.
Can I use my own solicitor for an NHS settlement?
Yes. You have the statutory right to choose any independent, qualified SRA-regulated solicitor. You are never obliged to use any panel firm suggested by your NHS trust.
References and Legislation
- HM Treasury: Guidance on Public Sector Exit Payments (including Special Severance Payments)
- HM Treasury: Managing Public Money, Annex 4.13 (Special Payments)
- Employment Rights Act 1996, Section 43J (Protected disclosures)
- Employment Rights Act 1996, Section 203 (Restrictions on contracting out)
- NHS Terms and Conditions of Service Handbook, Section 16 (Redundancy Pay) and Section 17 (MARS)
- Income Tax (Earnings and Pensions) Act 2003, Section 403 (Tax-free exemption)
Related Guides & Calculators
Protective Award Calculator UK
Calculate compensation up to 90 days gross pay for failure to consult in collective redundancies.
Statutory Redundancy Calculator
Calculate your statutory redundancy pay floor under the 2026 weekly cap of £751.
The £30,000 Tax-Free Settlement Rule
Learn which elements of your NHS settlement qualify for the tax-free exemption under s.403.
Employer-Recommended Solicitors
Understand your statutory right to choose your own independent employment solicitor.
SettlementCheck is an independent introduction service. We are not a law firm and we do not provide legal advice. All solicitors on our panel are independently SRA-regulated. This guide provides factual information regarding the settlement process and does not constitute legal counsel.