News & Views

Employer pension contributions count towards a week's pay under the ERA 1996

DMK
BY Donald MacKinnon
Employment law
BG Purple

The EAT has held that a “week’s pay” under the Employment Rights Act should include employer pension contributions. Previously, the approach taken by employment tribunals was to discount employer pension contributions, on the basis that these were not paid directly to the employee but to the pension fund.  

The statutory calculation of a week’s pay is used in a variety of settings, including in calculation of redundancy payments, holiday pay and awards for unfair dismissal. However, this judgment is likely to be of primary significance in the calculation of unfair dismissal compensatory awards and awards for failure to inform and consult under TUPE. Both awards are subject to a cap of 52 weeks and 13 weeks respectively. Under the new approach, potential maximum liability could be increased substantially depending on the level of employer pension contributions. 

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