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Employers face increased liability as the way awards are calculated increases

University of Sunderland v Drossou

This decision of the Employment Appeal Tribunal changes established practice and increases the potential value of a week's pay.

This will be of particular significance for those payments or remedies where the value of a week's pay is not capped, such as

1)     compensatory awards; and

2)      compensation for failure to inform or consult when dealing with larger scale redundancies or proposed TUPE business transfers.

This  development would potentially increase the value of a week’s pay by perhaps up to 5% in money-purchase schemes or, for those employees who are members of  defined benefit schemes, probably a considerably higher percentage. Where multiple employees are involved the cumulative additional expense could be significant.

The value of Employers’ pension contributions had previously been excluded from the calculation of a “week’s pay” because those contributions were not received directly by the Employee but paid into the pension fund. However, the Drossou case now clarifies section 221(2) of the Employment Rights Act 1996 by re-defining a “week’s pay” as the amount payable by the Employer under the contract of employment including the weekly amount of the Employer’s contribution into the Employee’s pension fund.


To speak to our team about this topic or other related employment law issues please do not hesitate to get in contact. 

 

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