EQUAL PAY CLAIMS & THE LOCAL GOVERNMENT …

1 EQUAL Pay CLAIMS & The LOCAL GovernmentPension Scheme (LGPS)Does EQUAL pay compensation awarded (back pay/COT 3 payments)via an industrial tribunal count towards pensionable pay?The Fund has previously had this issue raised bymembers and employers alike, and has previouslystated that it was of the opinion that compensationpayments did not form part of a member pensionable pay for the purposes of , an industrial tribunal could make a back pay award. For a back pay award to be considered as LGPS pensionable pay, it must havethe characteristics of pay. This means it must betaxable and subject to national insurance (NI) deductions, it must be related to an individual s activity in the year and relate to hours worked setagainst an hourly rate or appropriate pay financial impact for an employing body and individual member of the LGPS are complicated. If an award is pensionable pay, employee and employer contributions will be required, and theindividual will need to disclose the arrears of payto any agency or body from which they haveclaimed assistance where earnings were used inthe calculation of benefit payable, eg, housing may affect future entitlement and there may be a reclaim of benefits, as benefit rules are complicated and can vary between agencies.

2 The relevant agency will need to consider theaward within the context of their rules and will advise accordingly on the impact it may have. If an award is compensation, no pension contributions will be required, but the individualwill need to declare the award to benefit agenciesand it may affect future individual who is in continual employment willhave their pension calculated on their best 12months pensionable pay in the last three years,subject to the usual LGPS rules regarding final pay. The Fund has had its position confirmed recentlywith counsel s advice, confirming the test is whatwas actually earned, was certain, or required speculative conditions to be satisfied. If it was thelatter, then any award could only be for damagesto put the claimants in the position they shouldhave been in had they had like benefits. A lump-sum of 1,000 per year for six years is agreed damages by way of compensation and not arrearsof pay.

3 It is not calculated by reference to what theclaimant would have earned had they received thesame pay as their Fund s position, therefore, remains that any such payments do not form part of a member s pensionable pay for the purposes of calculating benefits, as the payments do not have the characteristics of pay as , you may have seen the letter issued bythe GMB dated 12 March in respect of EQUAL payand the LGPS. A copy can be found at: , combined with the recent article on the Professional Pensions website: ledto a number of stakeholder discussions to ask if theFund s position has changed on this do not believe the situation has changed. As weare not in possession of the CLG letter quoted inthe GMB letter, we are unable to comment on the significance of that letter or the full context of the PAY CLAIMS & THE LOCALGOVERNMENT pension SCHEMEWEST MIDLANDS pension FUNDL ocal authorities are facingmulti-million pound EQUAL payheadacheProfessional Pensions, 3 June 2010By Tom SelbyCouncils could be hit with a multi-million poundbill in additional pension payments following anamendment to LOCAL GOVERNMENT pension Schemeregulations, a law firm issue relates to an EQUAL pay deal struck by theunions on behalf of their to the agreement, blue collar male workers inlocal GOVERNMENT were enrolled on a bonus scheme,but female workers were not.

4 This was deemed to bein breach of EQUAL pay a legally binding out of court settlement female employees were entitled to a compensationpayment to reflect the period of employment duringwhich they were excluded from the scheme. However,it first appeared the EQUAL pay compensation payments were not & Co LOCAL GOVERNMENT pensions strategistMike Woodall explained: Therefore most employersdid not deduct contributions from employees or payemployer contributions. However, the CLG appear tohave stated that the compensation element relates todistress not to back position was confirmed in a letter from CLG totrade union letter seen by PP read: Rather, the amendmentwas intended to apply only to the damages element of payments made for example, compensation awardedbecause the employer recognises that distress has been caused as a result of a particular example of unfairness.

5 Woodall said LOCAL GOVERNMENT employers would facea massive bill as a added: [The costs] are likely to run into hundredsof millions of pounds. Birmingham has already saidthis could cost them 30m, at a time when LOCAL governments are having to pull their belts in. There are going to be two direct impacts one is ittakes money away from frontline services, the other isthat all of that period for which back pay has beenpaid will be pensionable, and therefore pensionableentitlement will increase. And we re talking about sixor seven years. Change in law excludes pensions from EQUAL payThe Independent, Thursday 6 May 2010By Sarah Cassidy, Social Affairs CorrespondentThousands of low paid female council workerscould be condemned to an impoverished old ageafter the GOVERNMENT quietly changed the law tostop them receiving better ladies, cleaners and care assistants are amongthe workers who will be affected by the change tothe LOCAL GOVERNMENT pension scheme the new rules, women who win EQUAL pay caseswill no longer be able to have their pensions upgradedto bring them in line with those of male change in the regulations has also been backdatedto 1 April 2008, meaning that any EQUAL pay claimantwho settled their case after this date will lose anypension uplift they had secured.

6 One of the womenaffected, who did not want to be named, is a clericalworker for South Tyneside council, against which shelodged a successful EQUAL pay was paid around 16,000 a year, whereas male refuse collectors and road sweepers judged to bedoing comparable work were paid more than 20, settled her claim in 2008 and received a lumpsum of around 20,000 for six years of back pay andan agreement that her pension would rise. Becauseher case was settled after April 2008, she is no longerentitled to a higher said: "I just think it is scandalous that a Labourgovernment which is supposed to be in favour ofhelping the low paid and tackling inequality has chosen to bring this in." EQUAL pay cases have become extremely controversialand have pitted trade unions against no-win, no-feelawyers. One of these is Stefan Cross, who has securedlarge payouts for his clients - most recently for the4,000 women in Birmingham who could be entitled toshare up to 600 million in Cross said: "This is a very significant change.

7 We have been doing thousands of these cases andcouncils had agreed to increase these women's pensions in line with their settlements. Now theGovernment has changed the rules, with no consultation. I think it is absolutely staggering that agovernment that is introducing an equality bill canthen do this by the back door."A spokeswoman for UNISON, the largest public sectorunion, said: "There is no way that working womenshould be discriminated [against] on pay in their working lives, and then beyond into their retirement."A spokesman for the Department for Communitiesand LOCAL GOVERNMENT said the change was intendedto apply only to the damages element of paymentsmade - such as compensation awarded when distresshas been caused as a result of pay and the LGPST reatment of EQUAL Pay Settlements for pension PurposesEqual pay compensation (back pay) should be treatedas pensionable pay for the purposes of the LOCAL GOVERNMENT pension Caused by a Recent LGPS AmendmentA recent amendment to the LOCAL GOVERNMENT pension Scheme which is backdated to apply from 1 April 2008, appears to exclude EQUAL pay settlements from pensionable pay.

8 This only applies toEngland and Wales; the schemes in Northern Irelandand Scotland do not seem to have replicated thisamendment. The revised LGPS (England & Wales) Benefit Regulations now include the following exclusion from pensionable pay:(g) any payment by way of compensation forthe purposes of achieving EQUAL pay in relationto other would mean that members who receive equalpay compensation are not able to count this towardstheir pension . GMB said this was wrong and raised itwith Sought Clarity from CLGF ollowing GMB s correspondence with CLG, they haveconfirmed that their intention was only to excludecompensation for distress or inconvenience (the damages element that is rarely paid). The new regulation is not intended to stop members incorporating their EQUAL pay compensation into theirpensionable pay. The amendment is not intended to excludefrom the definition of pensionable pay any increases in salary, even those which have beenawarded to achieve equality.

9 Rather, theamendment was intended to apply only to thedamages element of payments made for example, compensation awarded because theemployer recognises that distress has beencaused as a result of a particular example ofunfairness. CLG letter to GMB 5 March 2010