Employer’s pension contributions count towards a week’s pay

It has been long standing practice that when calculating a week's pay for redundancy payments and certain employment tribunal awards, that employer pension contributions are not included. However, the Employment Appeal Tribunal (EAT) has recently held, in the case of University of Sunderland v Drossou that the calculation of a "week's pay" under s.221(2) Employment Rights Act 1996 should include employer pension contributions, and not just be the basic pay.

A week's pay for calculating redundancy pay is currently capped at £489 and this decision does not alter the level of the cap. Depending on the amount that the employee earns and if it is less than £489 per week they may receive more now due to the employer’s pension contributions being taken into account. 

Contact us if you would like assistance on calculating redundancy payments on 01245 261883