How do we calculate a day’s pay? The Supreme Court has struck on the answer, writes Deborah Miller.

The Supreme Court has handed down its judgment in Hartley v King Edward VI College UKSC 39, in a case concerning the amount of pay an employer can deduct for each day of strike action.

The Facts

In November 2011 teachers employed by Kind Edward VI College participated in lawful strike action. The teachers’ contracts of employment incorporated terms from a collective agreement, known as the Red Book. This provided that when an employee went on strike, the employer could withhold pay for those days of strike action. The teachers’ pay was expressed in their contracts as an annual salary. The question, unanswered by the contractual provisions, was how to calculate pay for each of those days, and therefore how much pay the employer could deduct.

The Court of Appeal’s view was that a day’s pay was 1/260th of the annual salary, 260 being the number of weekdays in the year. The teachers’ appealed to the Supreme Court.

The Decision

The Supreme Court held, interpreting the Apportionment Act 1870, that because the contracts were ‘annual contracts’, with payment by monthly installments of an annual salary, that pay accrued on a daily basis over 365 days of the year. The college was therefore only permitted to deduct 1/365th of the annual salary for the day in question.

It is important to note that this would not have been the case where the contract expressed otherwise, or where pay was expressed per hour. The Supreme Court also highlighted the fact that teachers worked outside of their basic contractual hours, planning lessons and marking work during evenings, weekends and holidays.

The Implications

It is not time to down tools just yet, as the decision is fact sensitive. Other cases with different contractual provisions and different working and pay arrangements may require a different calculation.

Nevertheless, where an individual works under an ‘annual contract’, then unless the contract says otherwise, deductions for a day’s pay will be 1/365th of an employee’s annual salary.

This principle is not limited to strike action and will apply to other periods of unpaid leave, such as unpaid time off to care for a dependent, or compassionate leave.

Employers may, therefore, wish to review their contracts and policies in light of this decision, and in any event should bear this decision in mind when deducting pay for unpaid leave. Taking advice now, or at least before making any deductions, may prevent industrial disputes later.

The full judgment can be read here.