How do Permanent Health Insurance pay outs affect discrimination compensation?

An employment tribunal had been correct not to reduce an employee’s losses by the full amount of Permanent Health Insurance payments he was receiving in circumstances where the Permanent Health Insurance benefit was provided as part of a flexible benefits policy.  

Facts

In Colt Technology Services Ltd v Brown, Mr Brown was receiving Permanent Health Insurance (PHI) pay outs equivalent to 75% of salary. PHI formed part of a flexible benefits policy which allowed employees to choose the level of cover. Mr Brown had chosen the default position, but could have elected to be paid more and reduce his PHI cover to 50% of salary.   

Mr Brown brought successful claims for disability discrimination.  Where an employer provides an employee with a PHI benefit, payments under that policy are normally offset against the employee’s losses when the tribunal assesses compensation.  When the tribunal came to assess Mr Brown’s compensation, it deducted PHI payments equivalent of 50% of salary from his losses, rather than deducting the 75% of salary he was actually receiving.  The employer appealed to the EAT.

Decision 

The EAT upheld the tribunal decision.  Although the employer had paid the insurance premiums, by foregoing additional salary under the flexible benefits package, Mr Brown had contributed to the PHI premiums.  The tribunal had therefore been correct to only deduct PHI payments equivalent to 50% of salary when assessing his losses.  

Implications

Employers will not be able to obtain the full benefit of PHI pay-outs where the benefit has been partly funded by the employee through a flexible benefits scheme.