‘Pensionable earnings' clarified in test case

Posted: 15th November 2018

CoinsIf an employee chooses to go the extra mile and works outside normal office hours, does the additional income received form part of his or her pensionable earnings?

The Court of Appeal analysed that exact issue, in an important test case, boosting the redundancy compensation and pension entitlements of a civil servant who regularly toiled at weekends.

The IT specialist worked for HM Court Service (HMCS) under a contract which at first required him to work 36.25 hours a week. The contract made no provision for overtime.

The pressure of work was such, however, that he agreed to work extra hours at weekends. His contract was amended to reflect that arrangement and he was paid for the additional hours worked.

After he was laid off, HMCS calculated his redundancy compensation and his future pension entitlements on the basis of the 36.25 hours originally specified in his contract. The additional pay he earned at weekends was left out of account. After lawyers launched proceedings on his behalf, however, a judge upheld their arguments that, on a true interpretation of the Principal Civil Service Pension Scheme, the pay he earned at weekends qualified as pensionable earnings.

In dismissing a challenge to that ruling brought by the Ministry of Justice and the Cabinet Office, the Court rejected arguments that only remuneration that the man received for hours precisely specified in his contract qualified as pensionable earnings.

The amended contract required him to work a reasonable number of hours at weekends and imposed a reciprocal obligation on HMCS to pay him for those hours. When the man worked at weekends, he was working in accordance with his obligatory contractual working hours and was not undertaking overtime.