Where an Employment Tribunal makes a finding of unfair dismissal, it will assess the amount of the basic award payable by reference to a week’s wages. The legislation caps the amount of a week’s wage at £489 (currently). This means that, if an employee earns at the rate of £600 a week, their entitlement will be capped at £489 multiplied by a determined number of weeks.
The real effect on such things as redundancy and unfair dismissal is where the employee is relatively lowly paid. Say, for instance, an employee is paid at the rate of £300 a week but with a 7% employer’s contribution to pension. Until very recently, the pension contribution was ignored. But not now.
A recent case has established (subject to appeal) that, in order to calculate an employee’s earnings, the amount of employer pension contributions must be taken into account.
It follows, in the example given above, that the employee on £300 a week will be able to claim an award based on £321 a week.
There are other employment claims where the cap does not apply and further advice will be needed before determining the amount of entitlement.
If you need advice on any Employment matter - either as an employer or an employee - please contact Julian Freeland on 01869 252244.