Deductions from wages, calculation of rate of pay

Case ref: 4.5/August 2004

Summary of case

The case was concerned with a member, Mr X, who was dismissed on grounds of "medical inefficiency". The member suffered from stress related illness and depression. There were also allegations of harassment and victimisation in the workplace.

Advice requested

Initially legal advice was sought on the question of the dismissal, and potential discrimination. However, a question arose at a later date about unpaid wages and how this had been calculated by the employer.

Key advice provided by Thompsons

The solicitor provided some specific advice which confirmed that with regard to holiday pay and in so far as the contractual position was concerned, Mr X was not entitled to any more money than he had been paid. There was insufficient information for the solicitor to advise on whether any claim could be made under the Working Time Regulations. However, the solicitor did have some firm advice on how the employer had calculated the rate of pay. He advised: 

"What I can say with some certainty is that the way that the department has calculated the rate of pay is not correct. The department appear to have simply divided Mr X's annual salary by 365. Recent decisions of the EAT have decided that where, for example, an individual is working a five day week, the annual salary must be divided by 365, and then multiplied by seven-fifths, to arrive at a daily rate for the days actually worked. (See Taylor v The East Midlands Offender Employment Consortium (2000) IRLR 760).

"A different division of the EAT sitting in Scotland, decided that the annual salary should be divided by the number of working days in the year (Leisure Leagues UK Ltd v Maconnachie (2002) IRLR 600). Whichever method is used, does not make a significant difference to the amount due, but it will almost certainly be more than the amount allowed by the dept."

Legal department comment

Although this advice was provided in the context of a dismissal decision, the advice provided by Thompsons on the formula ETs use to determine pay calculations may be of use in other cases where the rate of pay is disputed.

Updated 29 Jan 2017

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