Should Redundancy Pay Include Regular & Consistent Overtime?
Discussion
Trying to get a sense check on a friend’s redundancy payment calculation.
No union membership, 13 years service, redundancy is “genuine” and not really able to be pushed back against on a basic level as it’s pretty much the whole department involved in this job role. Will be basic government-mandated statutory redundancy and nothing above that.
I do not know what their employment contact or company policies etc say in any specific detail.
However, there’s a question over what level of pay should be used for calculating their redundancy pay.
They work part time hours, and have done for quite some time. That’s their contracted hours as I understand it.
At one point, they had a second job. About a year ago, they quit that job, and spoke to their manager at this “primary” job about increasing their hours there.
The answer was they weren’t able to offer a new contract at that time for budget reasons, but that overtime was ok until that could happen (it never did).
Friend has since been working overtime every week, which has increased their income to a similar level to if they worked full time anyway.
However, the letter regarding redundancy has provided a redundancy pay calculation based solely on their base pay.
With having worked consistent and regular overtime for a year, can it be argued that the overtime hours/pay have become an implied term of their employment contract?
If the work they have been assigned and are graded against is of a load/volume that it can only be completed with the use of these regular overtime hours, would that add weight to the argument?
Should their redundancy pay be based on their average weekly gross pay for the preceding 12 weeks, rather than their contracted weekly base pay?
Is there a free or low-cost resource they could try for direct advice, or form letters on the subject etc?
No union membership, 13 years service, redundancy is “genuine” and not really able to be pushed back against on a basic level as it’s pretty much the whole department involved in this job role. Will be basic government-mandated statutory redundancy and nothing above that.
I do not know what their employment contact or company policies etc say in any specific detail.
However, there’s a question over what level of pay should be used for calculating their redundancy pay.
They work part time hours, and have done for quite some time. That’s their contracted hours as I understand it.
At one point, they had a second job. About a year ago, they quit that job, and spoke to their manager at this “primary” job about increasing their hours there.
The answer was they weren’t able to offer a new contract at that time for budget reasons, but that overtime was ok until that could happen (it never did).
Friend has since been working overtime every week, which has increased their income to a similar level to if they worked full time anyway.
However, the letter regarding redundancy has provided a redundancy pay calculation based solely on their base pay.
With having worked consistent and regular overtime for a year, can it be argued that the overtime hours/pay have become an implied term of their employment contract?
If the work they have been assigned and are graded against is of a load/volume that it can only be completed with the use of these regular overtime hours, would that add weight to the argument?
Should their redundancy pay be based on their average weekly gross pay for the preceding 12 weeks, rather than their contracted weekly base pay?
Is there a free or low-cost resource they could try for direct advice, or form letters on the subject etc?
The redundancy offer would have to meet the minimum requirements in law.
You could work out that here.
https://www.gov.uk/calculate-your-redundancy-pay
Anything over and above is I would imagine discretionary..
You could work out that here.
https://www.gov.uk/calculate-your-redundancy-pay
Anything over and above is I would imagine discretionary..
hmg said:
The redundancy offer would have to meet the minimum requirements in law.
You could work out that here.
https://www.gov.uk/calculate-your-redundancy-pay
Anything over and above is I would imagine discretionary..
Yes, the calculation is correct per their base pay.You could work out that here.
https://www.gov.uk/calculate-your-redundancy-pay
Anything over and above is I would imagine discretionary..
The question is whether the weekly gross pay number that feeds into that calculation should include overtime in this scenario.
If it is regular overtime and has historically been paid then regardless of the contract it should be included in the calculations. IIRC it should be an average of the previous 12 weeks employment. There have been instances of case law that have found in favour of the employees in similar circumstances.
Edited by hmg on Thursday 23 October 19:30
InitialDave said:
hmg said:
The redundancy offer would have to meet the minimum requirements in law.
You could work out that here.
https://www.gov.uk/calculate-your-redundancy-pay
Anything over and above is I would imagine discretionary..
Yes, the calculation is correct per their base pay.You could work out that here.
https://www.gov.uk/calculate-your-redundancy-pay
Anything over and above is I would imagine discretionary..
The question is whether the weekly gross pay number that feeds into that calculation should include overtime in this scenario.
Your weekly pay is the average you earned per week over the 12 weeks before the day you got your redundancy notice.
Does that not answer the question?
timbo999 said:
That link states:
Your weekly pay is the average you earned per week over the 12 weeks before the day you got your redundancy notice.
Does that not answer the question?
Based on prior experience of how accurate and complete the stuff on the government sites is, I'm afraid not. I think it's a oversimplifying the subject to make it easy to use.Your weekly pay is the average you earned per week over the 12 weeks before the day you got your redundancy notice.
Does that not answer the question?
As the employer has clearly worked on the principle that the overtime doesn't count, I'm trying to find something that more clearly defines whether they are right or wrong, in order to better equip my friend for what I suspect may be a snotty letter argument session.
hmg said:
If it is regular overtime and has historically been paid then regardless of the contract it should be included in the calculations. IIRC it should be an average of the previous 12 weeks employment. There have been instances of case law that have found in favour of the employees in similar circumstances.
Yes, this is what I believe is correct, but I was unsure if there were some kind of "this regulation here says..." reference I can point them to in order to assist in making the employer apply such.Edited by hmg on Thursday 23 October 19:30
Look at sections 220-223 of the Employment Rights Act of 1996:
220 Introductory.
The amount of a week s pay of an employee shall be calculated for the purposes of this Act in accordance with this Chapter.
221 General.
(1)This section and sections 222 and 223 apply where there are normal working hours for the employee when employed under the contract of employment in force on the calculation date.
(2)Subject to section 222, if the employee s remuneration for employment in normal working hours (whether by the hour or week or other period) does not vary with the amount of work done in the period, the amount of a week s pay is the amount which is payable by the employer under the contract of employment in force on the calculation date if the employee works throughout his normal working hours in a week.
(3)Subject to section 222, if the employee s remuneration for employment in normal working hours (whether by the hour or week or other period) does vary with the amount of work done in the period, the amount of a week s pay is the amount of remuneration for the number of normal working hours in a week calculated at the average hourly rate of remuneration payable by the employer to the employee in respect of the period of twelve weeks ending
(a)where the calculation date is the last day of a week, with that week, and
(b)otherwise, with the last complete week before the calculation date.
(4)In this section references to remuneration varying with the amount of work done includes remuneration which may include any commission or similar payment which varies in amount.
(5)This section is subject to sections 227 and 228.
222 Remuneration varying according to time of work.
(1)This section applies if the employee is required under the contract of employment in force on the calculation date to work during normal working hours on days of the week, or at times of the day, which differ from week to week or over a longer period so that the remuneration payable for, or apportionable to, any week varies according to the incidence of those days or times.
(2)The amount of a week s pay is the amount of remuneration for the average number of weekly normal working hours at the average hourly rate of remuneration.
(3)For the purposes of subsection (2)
(a)the average number of weekly hours is calculated by dividing by twelve the total number of the employee s normal working hours during the relevant period of twelve weeks, and
(b)the average hourly rate of remuneration is the average hourly rate of remuneration payable by the employer to the employee in respect of the relevant period of twelve weeks.
(4)In subsection (3) the relevant period of twelve weeks means the period of twelve weeks ending
(a)where the calculation date is the last day of a week, with that week, and
(b)otherwise, with the last complete week before the calculation date.
(5)This section is subject to sections 227 and 228.
223 Supplementary.
(1)For the purposes of sections 221 and 222, in arriving at the average hourly rate of remuneration, only
(a)the hours when the employee was working, and
(b)the remuneration payable for, or apportionable to, those hours,
shall be brought in.
(2)If for any of the twelve weeks mentioned in sections 221 and 222 no remuneration within subsection (1)(b) was payable by the employer to the employee, account shall be taken of remuneration in earlier weeks so as to bring up to twelve the number of weeks of which account is taken.
(3)Where
(a)in arriving at the average hourly rate of remuneration, account has to be taken of remuneration payable for, or apportionable to, work done in hours other than normal working hours, and
(b)the amount of that remuneration was greater than it would have been if the work had been done in normal working hours (or, in a case within section 234(3), in normal working hours falling within the number of hours without overtime),
account shall be taken of that remuneration as if the work had been done in such hours and the amount of that remuneration had been reduced accordingly.
220 Introductory.
The amount of a week s pay of an employee shall be calculated for the purposes of this Act in accordance with this Chapter.
221 General.
(1)This section and sections 222 and 223 apply where there are normal working hours for the employee when employed under the contract of employment in force on the calculation date.
(2)Subject to section 222, if the employee s remuneration for employment in normal working hours (whether by the hour or week or other period) does not vary with the amount of work done in the period, the amount of a week s pay is the amount which is payable by the employer under the contract of employment in force on the calculation date if the employee works throughout his normal working hours in a week.
(3)Subject to section 222, if the employee s remuneration for employment in normal working hours (whether by the hour or week or other period) does vary with the amount of work done in the period, the amount of a week s pay is the amount of remuneration for the number of normal working hours in a week calculated at the average hourly rate of remuneration payable by the employer to the employee in respect of the period of twelve weeks ending
(a)where the calculation date is the last day of a week, with that week, and
(b)otherwise, with the last complete week before the calculation date.
(4)In this section references to remuneration varying with the amount of work done includes remuneration which may include any commission or similar payment which varies in amount.
(5)This section is subject to sections 227 and 228.
222 Remuneration varying according to time of work.
(1)This section applies if the employee is required under the contract of employment in force on the calculation date to work during normal working hours on days of the week, or at times of the day, which differ from week to week or over a longer period so that the remuneration payable for, or apportionable to, any week varies according to the incidence of those days or times.
(2)The amount of a week s pay is the amount of remuneration for the average number of weekly normal working hours at the average hourly rate of remuneration.
(3)For the purposes of subsection (2)
(a)the average number of weekly hours is calculated by dividing by twelve the total number of the employee s normal working hours during the relevant period of twelve weeks, and
(b)the average hourly rate of remuneration is the average hourly rate of remuneration payable by the employer to the employee in respect of the relevant period of twelve weeks.
(4)In subsection (3) the relevant period of twelve weeks means the period of twelve weeks ending
(a)where the calculation date is the last day of a week, with that week, and
(b)otherwise, with the last complete week before the calculation date.
(5)This section is subject to sections 227 and 228.
223 Supplementary.
(1)For the purposes of sections 221 and 222, in arriving at the average hourly rate of remuneration, only
(a)the hours when the employee was working, and
(b)the remuneration payable for, or apportionable to, those hours,
shall be brought in.
(2)If for any of the twelve weeks mentioned in sections 221 and 222 no remuneration within subsection (1)(b) was payable by the employer to the employee, account shall be taken of remuneration in earlier weeks so as to bring up to twelve the number of weeks of which account is taken.
(3)Where
(a)in arriving at the average hourly rate of remuneration, account has to be taken of remuneration payable for, or apportionable to, work done in hours other than normal working hours, and
(b)the amount of that remuneration was greater than it would have been if the work had been done in normal working hours (or, in a case within section 234(3), in normal working hours falling within the number of hours without overtime),
account shall be taken of that remuneration as if the work had been done in such hours and the amount of that remuneration had been reduced accordingly.
Thanks for that, can I request assistance on the interpretation of 223 (3)?
Does it mean that the additional hours normally worked over base contract "normal hours" should be taken into account for the averaging, but they should only be done so at base pay, not any uplift from higher overtime rates?
Does it mean that the additional hours normally worked over base contract "normal hours" should be taken into account for the averaging, but they should only be done so at base pay, not any uplift from higher overtime rates?
Thanks for the second opinion, anyway, always hard to know if you're interpreting such things in the right way.
As an update, my friend had a discussion with HR, who didn't outright dismiss the idea, and it seems were under the impression that they worked fewer hours than they do.
HR are going to meet with the direct manager for the role/department and check what hours and duties were agreed on and how this was communicated.
So it may have legs. We shall see.
As an update, my friend had a discussion with HR, who didn't outright dismiss the idea, and it seems were under the impression that they worked fewer hours than they do.
HR are going to meet with the direct manager for the role/department and check what hours and duties were agreed on and how this was communicated.
So it may have legs. We shall see.
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