Questions have been raised in Parliament after it was revealed that former further education chief John Harwood left his post with a pound;218,700 Treasury-approved golden handshake.
The pay-off, which emerged in the annual accounts of the Learning and Skills Council, has led MPs to call for an explanation from the quango.
Mr Harwood received the money after completing three of his contracted four years. The LSC conceded this week that the severance deal - which it was committed to pay under the contract - effectively entitled the LSC chief to as much as he would have received had he remained in post.
Chris Grayling, the Conservative education spokesman, said: "Most people are on three months' notice. This is waste in the most extreme sense.
"It can't possibly be justified. Someone has done an appallingly bad job in managing his employment and severance arrangements. It is further evidence of the unnecessary waste in the system.
"At a time when people are saying they are having to cut level 3 provision (A-level equivalent), to have a bumper pay-off for the chief executive of the LSC like this is grotesque and insensitive."
Barry Sheerman, chairman of the Commons education select committee, said he was surprised by the payment's size, and would be requesting more information on how the sum was reached.
Paul Holmes, a Liberal Democrat member of Mr Sheerman's committee, tabled Parliamentary questions about the pay-off within an hour of it being brought to his attention this week.
He is demanding to know why Mr Harwood left his post early and why the pay-out was sanctioned by the DfES.
He said: "It seems outrageous. It would be interesting to know why he went.
We need to know why the taxpayer should have to pay more than pound;200,000 to compensate him."
Mr Grayling was also expected to table a Parliamentary question, asking Ruth Kelly, the Education Secretary, to make a statement about the pay-off.
Mr Harwood retired from the LSC in September 2003. At the time, the council had started a cost-saving staffing review which eventually led to the loss of 800 of its 5,000 posts.
The payment compensated him for the loss of his salary - which at around Pounds 140,000 was likely to have been increased before the end of his contract - and other entitlements including pension contributions and bonuses.
Mr Harwood, who was also given the use of the company lease car for a year after his departure, was succeeded by tabloid newspaper executive Mark Haysom. Mr Haysom's salary is reported as pound;200,000, but it is believed his contract does not include similar severance terms to Mr Harwood's.
David Russell, the LSC's director of resources, said: "It (the pay-off) includes the bonus he would have been entitled to anyway. He was on about pound;140,000 and there would have been a further pay review. We also had to get agreement from the DfES."
Mr Harwood was chief executive of Oxfordshire county council before his LSC appointment. After leaving, he worked for a short period as interim chief executive of Cumbria county council.
Treasury guidance on public-sector pay-offs says "public funds must not be used wastefully or to underwrite inequitable or over-generous conditions of service".
Mr Russell said the Treasury was consulted and he is confident its guidelines were met.