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Redundancy payment calculations for civil service workers will be overhauled in the Spring of next year, as Cabinet Office Minister, Tessa Jowell, claims the current system is “inappropriate for the modern civil service”.

From April 1st, 2010, compulsory redundancy payouts will be limited to two-years’ salary for workers earning more than £25,000 annually, and three-years’ salary, or £50,000 (whichever is less) for those earning under £25,000.

Workers who return to employment within the civil service after being made redundant will have to pay back redundancy payments on a pro-rata basis.

The changes are set to save the government £500m over the next three years but have been fiercely criticised by civil service employees.

Unions are currently considering legal action against the government, claiming the changes are targeting public workers and will see staff “robbed of their entitlements”. Unions have also maintained that Ms Jowell breached ministerial promises and failed to consult with them on proposed changes beforehand.

A Cabinet Office spokeswoman has defended the decision, claiming: “The existing terms of the Civil Service Compensation Scheme are expensive and substantially more generous than those generally available in the wider public and the private sectors.”