United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	Mr G H Chambers (in Person)
For the Respondents	Mr T Ladbrooke (Representative) Cromwell Group (Holdings) Ltd PO Box 14 Victoria Street Wigston Leicester LE18 1AT


 


JUDGE WILSON: The Tribunal has heard full arguments on each side today in the Appellant's appeal against the decision of the Chairman of Employment Tribunals sitting alone at Southampton on the 31^st July 1998 that there had been an unlawful deduction from the wages of the Applicant in respect of the difference between the Respondent's 3.% calculation based on the Applicant's gross salary as at March 1998 and his revised salary as at April 1998 in calculating the employers pension contribution for April 1998.

1. The Chairman provided extended reasons for the conclusion to which he came and prefaced them by saying it was an unusual and therefore interesting case which although involving a comparatively trivial amount of money raised important issues of principle for both parties. We recognise the truth of that statement by the Chairman and indeed adopt his sentiments.
2. The facts which he found proved are as follows: the Appellant today had been employed by the Respondent since January 1995 and continues to be so employed. An announcement was made on the 28^th August 1996 about a pension plan to be effective from the first of September 1996. Under it the employer and the employee were each to pay an amount equal to 3% of the employee's salary. The membership of the pension fund was not compulsory. There was already in existence with the same provider a pension fund for which the Appellant was not eligible but whose anniversary date was also the 1^st September. The Appellant decided that he would join the scheme and payments were made in accordance with the terms which had been announced. In April 1997, the Appellant received a pay rise but the deduction from his salary of his own pension contribution remained what it had previously been as did the contribution by the employer. The Appellant complained about this and was told by the pension trustees' nominee that the scheme ran from the 1^st September each year and that it was the most appropriate date from an administrative point of view because it coincided with the Respondent's company's financial year end. The Appellant took it further and communicated with one of the trustees' who confirmed what he had already been in told not least because the months in between were the busiest period for the payroll department. The letter did not indicate whether a payment would be reviewed on the first of September but implied that the increased salary would be taken into account from that date. The Appellant was still not satisfied and continued his correspondence with the trustees. Eventually there was a letter stating that as from 1^st September 1997 contributions were based upon the basic salary including the April 1997 pay rise, and that an additional payment would be made on behalf of the Respondent to cover the contribution between April and August 1997.
3. That appeared to be the conclusion of the matter, but as the Chairman found, unfortunately, when the Appellant received his pay rise in April 1998, exactly the same situation arose and in paragraph 24 of the Extended Reasons the Chairman states:

"that it was agreed that the one matter which was a live issue and fell for decision was whether the Respondent had made an unlawful deduction from the Appellants wages in respect of the failure to calculate the 3% of gross salary on the basis of the Applicants increased salary as from April 1997 to the date of the originating application, the 17^th June 1998. This would mean the difference between the actual employers contribution and the contribution based on the Applicant's increased salary for the months of April and May".

4. The Chairman referred to the fact that the Appellant conceded that he had received with his April 1998 payslip two documents dealing with pension matters. The second, although somewhat ambiguous, apparently meant that the Respondent was paying what was described as a one off payment to cover the increased amount due from the company and the members for the months of April to August 1997. The Applicant told the Chairman that he accepted that that payment related only to the payments in 1997 and not to any future payments.
5. The second document with the Applicant's April 1998 payslip dealt with the question of contributions and stated:

"we will contribute 3% of your salary to the scheme on your behalf as a member you will also pay 3% of your salary. Salary is set when you enter the scheme and updated on each 1^st September for the following year based upon your salary as at 1^st September. It is the annual rate of your basic salary or wages prior to the deduction of any profit related pay".

6. That document, of course, clarified the position and the Chairman went on to express his conclusions the most important of which was to recognise that the employer's contribution was to be classed as pay having regard to the authority to which he was referred. To the extent, therefore, that any increase was not paid; there could be an alleged deduction from the Applicant's wages. However, he went on to point out that the Appellant had accepted that a booklet which he had received stated that the employer reserved the right to change or even stop the scheme and the applicant conceded that under that clause he had been given notice that the employer reserved the right to change the pension scheme.
7. The Applicant also conceded that the document with the April 1998 payslip which dealt with setting the date when anniversaries would occur was also relevant because it was the first time upon which the company had ever expressly stated to the Applicant how the contribution was to be calculated
8. In paragraph 42 of his extended reasons, the Chairman expressed the following:

"it must be a matter of regret that the company had not made this clearer in its previous documentation. Indeed, this whole claim may well have been unnecessary if there had been better communication and information from the Respondent".

We think that those representing the company today would accept the relevance and the accuracy of that remark.

9. In paragraph 44, the Chairman said as follows

"I therefore declare that for the April contribution at least, there has been an unlawful deduction from the wages of the Applicant in that the Respondent has not made the additional payment in respect of the 3% of the Applicant's then revised salary. In other words, it is a comparatively trivial amount of the difference between the 3% of his gross salary as at March and the 3% of his gross salary as at April 1998".

10. From that declaration the Appellant appeals and he submits to this tribunal that because contributions are to be regarded as "pay", the contributions should change when the pay rate scales change and not on the anniversary of the beginning of the pension scheme. He further submits that it is not open to the employer arbitrarily to change obligations under the pension scheme simply by giving notice of those changes. He recognises, however, that the employer can change the pension scheme, but not the contract of employment and he contents that the pension scheme is part of the contract of employment. He recognises that the Respondent can change the rules of the scheme but he says there is nothing in the rules about the amount of contributions and that is part of the contract of employment and not subject to change in the same way.
11. Mr Ladbroke, on behalf of the company, submits that a distinction should be drawn, as the company draws it, between being in the scheme and being eligible for it. He points out that there was a previous scheme operated on an anniversary date of the 1^st September with employee contributions and employer contributions as before and the same provider but this was a different scheme for which this Appellant was not eglible.
12. The new scheme was to have the same anniversary date as the original scheme and he submits that while initially there was doubt, that doubt was resolved by the service of the notice expressing terms precisely in April 1998. He recognises that it would have been more prudent had the trustees of the scheme and the company given that notice before the end of the old financial year, but that did not happen and implicitly the company recognises the justice of the declaration made by the Chairman because there is no cross appeal.
13. We have to decide between those different contentions and we take into account, as we pointed out to Mr Chambers, that so far as the pension scheme is concerned there is a third and most important body of interest, namely the trustees of the scheme. The scheme is negotiated for the benefit of the employees between the employer and the provider and the rules are as between them.
14. We do not agree with the contention that Mr Chambers makes that the rules of the scheme are part of his contract of employment. They are not, and providing the employer gives sufficient notice of change, that is a perfectly lawful thing for him to do.
15. We take note of his complaint that the effect of the position of having an anniversary date six months later or five months later than a pay rise is contrary to the employees interests, but we note two things about that. The first is that it is an effective disadvantage only with regard to the final six months of any employment. It is not an accumulative disadvantage and secondly, it is open to any employee to top up the contribution for those few months under the terms of the scheme.
16. Accordingly, we cannot find any error in law in the approach made by the Chairman or in the conclusion he reached and the Appeal is dismissed.