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There was no indication that an Employment Tribunal had considered, in awarding compensation for 10 years' loss of pension rights, that it was taking account of accelerated payment, and a 5 per cent accelerated receipt discount was a wholly incorrect way of applying the conventional investment rate because it failed to recognise that it was intended to be an annual rate.
Employer's appeal from the decision of the Employment Appeal Tribunal ('EAT') on 31 May 2002 to uphold the tribunal's award of compensation for unfair dismissal and sex discrimination. At the remedies hearing, the tribunal had before it evidence from the applicant ('S') that out of the 50 jobs she had applied for, she had been offered only one. The tribunal, finding that it was unlikely that S would find pensionable employment again, awarded a compensation figure consisting of 2.5 years' loss of future earnings and 10 years' loss of future pension rights. The tribunal applied an accelerated payment deduction of 5 per cent, and awarded interest on the gross sum, from which tax and national insurance were to be deducted. The EAT dismissed the employer's appeal. The employer argued as follows: (i) there was no basis for the contrast between the period of loss of future earnings and loss of future pension, which had not been explained and was perverse as it did not follow that if S found a job within 2.5 years that she would ever be without a pension; (ii) the tribunal had misunderstood the conventional 5 per cent accelerated payment deduction rate, which was plainly an annual rate such that the tribunal's total discount for accelerate receipt was deficient; and (iii) it was wrong in principle to award interest on the gross sum of compensation as S would not actually receive the entire sum as deductions had to be made for tax and national insurance by the employer. S argued that: (a) the tribunal had already built into the award a substantial discount for accelerated receipt in that it had only awarded 10 years' loss of future pension even though it thought that S would not obtain pensionable employment before retirement age; and (b) an award of interest was governed by reg.2(1) Employment Tribunals (Interest on Awards etc) Regulations 1996 SI 1998/2803 such that interest was payable on the gross sum.
HELD: (1) The tribunal had to do what it could with the evidence put before it. Given S's evidence, which was not criticised, and in the absence of evidence from the employer, it could not be said that the tribunal's decision was perverse. (2) The conventional discount of 5 per cent was designed to reflect the annual yield that would be obtained on an investment. A tribunal ought not to ignore the fact of accelerated receipt. In the present case, there was no indication that the tribunal had considered, in awarding 10 years' loss of pension rights, that it was taking account of accelerated payment. The 5 per cent figure was a wholly incorrect way of applying the conventional investment rate because it failed to recognise that the rate was intended to be an annual rate. (3) The function of an award of interest was to compensate the party to whom the award was made for being kept out of money that she should have had in her pocket at an earlier date. Tax and national insurance would have been deducted from S's salary payments by the employer, and she would not have received the gross sum. There was no logical basis on which to award interest on what S would never have received.
Appeal allowed in part. Matter of accelerated payment deduction remitted to the tribunal.
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