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CLERK'S BRIEFING NOTE

CLERK'S GRATUITY

 

1. LEGAL POWERS FOR PARISH COUNCILS TO PAY GRATUITIES

  1. The legal power in 1979 was The Superannuation Act 1972.

  2. In 1996, changes were made with the introduction of The Local Government (Discretionary Payments Regulations 1996). Although this Act gave local councils the discretion to make a gratuity payment, the amounts could not exceed the prescribed maximum.

2. EMPLOYMENT OF PAULINE RAYMOND BY SEDLESCOMBE PARISH COUNCIL

  • Pauline Raymond was first employed by Sedlescombe Parish Council on 01/04/1975 as Deputy Clerk to Miss Phyllis Reeves who was planning to retire in 1976.

  • Pauline Raymond became Clerk to Sedlescombe Parish Council on 01/04/1976. By 1 April 2012, she will have been employed by Sedlescombe Parish Council 37 years (one year as Deputy).

  • On 11/12/1979, a draft Contract of Employment was issued by NALC. In accordance with this draft, a contract of employment was drawn up and signed by the Council and Clerk backdated to 01/04/1976.

  • Paragraph 7 of the Contract states:
    • Since the Clerk is not entitled to a pension in respect of the Clerkship, then provided that the Clerk shall have served the Council for a period of at least five years the Council shall upon the termination of this agreement (except where it shall have been ended by the Council because of the gross failure of the Clerk to perform the duties hereunder) or upon the death of the Clerk in office, exercise its power under the legislation relating to Local Government Superannuation to pay a gratuity to the Clerk or to her surviving husband as the case may be. The amount so paid shall be no less than such proportion of the Clerk's annual salary at the date of such termination or death as shall be equivalent to one-sixth thereof for each year of service or twice the amount of the Clerk's salary at the date of such termination, whichever is the less.

  • In 2011/12, Pauline Raymond's gross salary is £13,919 p.a.

3. EMPLOYMENT APPEAL TRIBUNAL

In 2003, a school cleaner named "Nicholls" took Greenwich London Borough Council to an Employment Appeal Tribunal because the Council had acted in accordance with The Local Government (Discretionary Payments Regulations 1996) and refused to pay the full gratuity payment which had formed part of her contract of employment since 1982.

Although the Employment Appeal Tribunal dismissed the case, the Court of Appeal found in favour of the appellant stating as follows:

  • The promise of payment of a retirement gratuity was a term or condition of the contract of employment appointing the applicant to hold office and could fairly and reasonably be described as a term on which a person "holds office" within the meaning of section 112(2) of the Local Government Act 1972, even though it related to a payment which was only made when she ceased to hold office. The local authority therefore had the power to enter into the term for payment of the gratuity. There was nothing in the language of the Local Government (Discretionary Payments) Regulations 1996 which clearly applied the new statutory cap retrospectively to a pre-existing entitlement falling due for payment after the Regulations were made. Accordingly, the Regulations did not operate retrospectively so as to deprive the applicant of her vested contractual right to be paid a gratuity in accordance with the terms of her contract.

4. PRE-1987 CONTRACTS OF EMPLOYMENT

The National Association of Local Councils published a Legal Topic Note (No.34) in November 2007. Paragraph 18 of this Topic Note states:

  • Following a Court of Appeal case (Nicholls v Greenwich LBC) [2003] EWCA Civ 416), if and only if, the gratuity is to be calculated in accordance with a contract of employment which came into effect prior to 1 April 1987 and is unaltered in this respect since, the maximum sum payable is controlled by the legislation prior to 31 March 1987 ie section 18 Local Government Superannuation Act 1953 which sets the maximum at twice the annual emoluments of the employment [A pre-regulation contract].

5. TAX ON GRATUITY

When the gratuity was originally agreed in 1979 (backdated to 1976), it would have been tax-free. By 1996, HM Revenue & Customs no longer had the discretion to approve gratuities that were not paid in accordance with the Local Government (Discretionary Payments) Regulations 1996 for tax purposes. The gratuity was, therefore, no longer tax free.

6. GOVERNMENT CHANGES IN GRATUITY PAYMENTS PROPOSED IN 2012

In August 2011, SALC highlighted the coalition proposals to revoke the 1996 regulations in 2012 so that Councils will no longer have the discretion to pay a retirement gratuity at all.

7. QUESTION TO BE ASKED:

Will the Court of Appeal 2003 case hold good for pre-1987 Contracts of Employment when the new Act is introduced in 2012?

Mrs P J Raymond
Clerk/RFO
Sedlescombe Parish Council

12 August 2011