The total amount of an employee’s ‘week’s pay’ under the Employment Rights Act 1996 is a number that is used to calculate various payments, including the amount of compensation an employee would get for unfair dismissal and under TUPE as well as the protective award for failing to collectively consult.
It has been longstanding practice to exclude employer pension contributions from the calculation of ‘a week’s pay’ as they are paid into a pension fund instead of to the employee directly. However, the Employment Appeal Tribunal has now upheld an Employment Tribunal’s decision that employer pension contributions are, in fact, included.
The decision means that the potential value of a week’s pay is higher, which will be of particular importance for payments or remedies where the value of a week’s pay is not capped. The increase will also be pronounced in cases where the employer participates in a defined benefit pension scheme with high employer contribution rates.