Lord Price, the former boss of supermarket chain Waitrose, was reported to have received a "golden goodbye" payment worth nearly £2 million recently. It provided a reminder that "golden handshakes" or "golden goodbyes" are often encountered in the private sector. Such payments receive a lot of criticism from both shareholders and the wider public but, despite significant public disapproval, there is little that can be done to limit payments like this.

The public sector is a different matter, though. As we’re talking about the public purse, there is genuine public interest in seeing exit payments limited. Recent concerns over the £304,000 severance payment made to John Doyle, the former principal of Coatbridge College, illustrates this.

The Scottish Government's move to curb excessive public sector exit payments in the civil service, councils, the health service, schools and most quangos will be welcomed by the general public. Whilst it is hoped these reforms will help manage reputational damage and keep public sector payments down, there is also the possibility that these reforms will create costly legal disputes and therefore impact on attempts to introduce greater efficiencies

Consultation took place on limiting exit payments for public sector workers last summer with draft regulations published in November. The proposed restrictions include the intention to impose a cap of £95,000 on the aggregate value of most public sector exit payments including those related to voluntary or compulsory redundancies, special severance payments or the monetary value of extra leave.

It doesn’t stop there though. The government has also published draft regulations setting out that those who earn £100,000 or more will be required to repay any exit payment if they return to the same sub-sector within 12 months. Further consultation also considered proposals such as setting a maximum tariff for calculating exit payments at three weeks' pay per year of service and a maximum salary which can be used for the calculation of exit payments. It is not yet known when these will come into force. Whilst a cap on the value of an exit payment may only impact on higher earners the clawback rules if the employee re-joins the sector may impact on anyone.

In theory the cap should mean the cost to the public sector of exits is reduced, however, the limit could make it harder to resolve disputes with employees leading to more proceeding to litigation. The point is that if a public authority has got things wrong and an employee has a genuine claim in excess of £95,000 such as for a discrimination issue it may be necessary to litigate.

Perhaps one of the biggest ways in which employees will feel disadvantaged by this cap is in relation to their pensions. As the cap applies to payments to reduce or eliminate an actuarial reduction to a pension on early retirement, this will lead to a situation where employees either need to accept the reduction or top it up themselves, neither of which are very attractive options.

This measure also has the potential to impact on the ability of organisations to restructure in order to create efficiencies. A review of the pension regulations will be required as this might deter employees from accepting voluntary redundancy and lead to more compulsory redundancies. This, in turn, could affect employers' ability to plan for the future and may represent a significant cultural shift.

Things are about to change in a significant way for the public sector in relation to exit payments and all public sector employers would be well advised to start preparing for these changes now. With the cap not due to come into force until October 1, 2016, public sector exit packages before then will need to be in line with good governance. Whilst this accountability is to be welcomed it is not without its difficulties.

Overall these proposals may create greater public confidence and foster a culture of greater accountability in the public sector but will it have any impact on the private sector?

Clearly there is much more of an ability to make payments in the private sector although shareholder approval is required for the majority of severance payments to company directors unless a specific exemption applies.

It will be interesting to see how these public sector developments bleed through into the private sector. In the private sector the UK Corporate Governance Code provides plc directors' notice periods should not exceed one year and there is greater emphasis on departing Executives having to minimise their losses. It is to be hoped these developments results in greater accountability and confidence in both the public and private sector.

David Hossack is a partner at law firm Morton Fraser.