Labour & European Law Review Weekly Issue 323 13 June 2013
Although the Employment Rights Act (ERA) states that employers cannot make unlawful deductions from workers’ wages, the definition of wages does not include pension payments. In Somerset County Council v Chambers, the Employment Appeal Tribunal (EAT) held that pension contributions made by employers are also excluded.
Mr Chambers worked as a full time social worker for the Council at the top of his pay scale (grade 9 on point 41), until his retirement in January 2003. He was also a member of the superannuation scheme to which both he and the Council contributed.
In June 2003, he joined the Emergency Duty Team as a locum social worker, doing the equivalent of about one third of a full-time post. He was paid on a daily basis at point 37 on the pay scale for the period between 2003 to 2012.
Initially he was allowed to continue his membership of the pension scheme but following a change to the rules in 2008 which required members to be on contracts lasting at least three months, the Council stopped making contributions. After an appeal, he was reinstated into the scheme but then told again he was ineligible and his contributions refunded.
He claimed that as he had continuous service with the Council, he should have been paid at the same rate as a full-time social worker. The Council had therefore made unauthorised deductions from his wages in relation to his ordinary pay, holiday pay and superannuation payments.
Section 27(1) ERA states that “wages” includes “any sums payable to the worker in connection with their employment ... whether payable under his contract or otherwise”, but excluding any payments within subsection (2).
Section 27(2) ERA states that “any payment by way of a pension, allowance or gratuity in connection with the worker’s retirement or as compensation for loss of office” is not included within the definition of “wages”.
The tribunal found that as Mr Chambers had been continuously employed by the Council, he was entitled to be paid at the same rate as a full-time social worker employee.
It followed that his holiday pay should also have been paid at the higher rate and that he was entitled to be a member of the superannuation scheme.
The EAT, however, allowed the Council’s appeal. It said that Mr Chambers was only entitled to be paid according to the rate of pay set out in the Council’s letter to him, dated 31 July 2003. This meant that his claim for the higher rate of pay (at point 41) in relation to ordinary and holiday pay, could not succeed.
As for the Council’s failure to make pension contributions to the superannuation fund on his behalf, the EAT said that these were not unauthorised deductions. Although European law considered entitlement to a pension to be “deferred pay”, that did not mean that an employer’s contributions to a pension fund on behalf of an employee amounted to “wages”.
Section 27(1)(a) just stated that wages included any sums payable to the worker in connection with their employment, not contributions paid to a pension provider on their behalf.