16 August 2017
Contrary to long established practice, the Employment Appeal Tribunal in University of Sunderland v Drossou UKEAT/0341/16/RN has held that the calculation of a “week’s pay” under the Employment Rights Act 1996 should include employer pension contributions. Previously these payments were excluded from the calculation of a week’s pay on the basis that they were not paid directly to the employee but to the pension fund.
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A number of entitlements and employment rights are calculated by reference to a week’s pay. These include statutory redundancy pay, holiday pay, unfair dismissal awards and protective awards for failure to inform and consult. The effect of the EAT’s decision in Drossou is to increase the potential cap (subject to the current overall cap of £80,541) of an unfair dismissal compensatory award (where the employer contributes to an employee’s pension fund) and will also apply to the calculation of remedies for other awards too. Respondents and Claimants should ensure that their quantifications of loss are updated and adjusted to reflect this development.
For further information, please contact your BTO contact.
Contact: Lesley Grant Associate ljg@bto.co.uk T. 0141 221 8012