Employer pension contributions count towards a week’s pay

Facts

In the Employment Appeal Tribunal (“EAT”) and in the matter of University of Sunderland (“University”) v Ms K Drossou, the University of Sunderland appealed against the finding that employer pension contributions are to be considered when calculating the claimant’s weekly pay.

Ms Drossou worked for the University and was dismissed as a result of an irretrievable breakdown in working relationships. Ms Drossou was considered to be the primary cause of the breakdown.  The employment tribunal found that she had been unfairly dismissed and ordered the University to reinstate her. The University did not comply with the order and the tribunal awarded compensation instead. The EAT departed from the usual practice of excluding pension payments in calculating the weekly wage on the basis that section 221(2) of the RTA 1996 does not state that the amount payable by the employer under the contract of employment has to be payable to the employee and remuneration in section 221(2) means a reward in return for services and pension contributions are no less a reward for service than basic pay. The University appealed this finding.

Decision

The appeal was dismissed. The EAT agreed with the tribunal with respect to the above reasons. The EAT drew the distinction between section 221(2) and section 27(1) of the RTA 1996. The latter specifies that the sums must be payable to the worker whereas those words are absent in section 221(2).

Comments

Pension payments have not been taken into consideration when calculating a claimant’s weekly wage on the basis that the payment is not received directly by the employee but paid into a pension fund. This decision has increased the potential value of a claimant’s weekly pay. This decision will be important for employers who pay a high employer contribution rate. It is yet to be seen whether there will be further litigation following this decision or whether the correctness of the EAT’s judgment will be challenged.

IMPORTANT: This blog is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

For further information on this or any other employment related matters please contact Rupert Farr on: 020 7952 6216 or [email protected].