Protective Awards: What is a “Week’s Pay”?

In Canadian Imperial Bank of Commerce v Beck, the EAT had to decide whether to take into account an employee’s discretionary bonus for the purposes of calculating “a week’s pay” in respect of calculating the protective award.

Mr Beck was awarded 90 days’ pay in respect of the company’s failure to comply with the collective redundancy consultation requirements.  Mr Beck is a banker and was paid a basic salary of £125,000 per year plus a bonus of £775,000 per year.  Mr Beck argued that the discretionary bonus payments he received should have been taken into consideration when calculating the rate of pay, as the majority of his remuneration was paid by way of bonus, as per the industry norm.  His rationale for this approach was that if the bonus was not to be included in the calculation, then banks would not be deterred from disregarding the group consultation procedures.  The EAT disagreed, stating that the basic annual salary “was not insignificant” and it could not be said that the bank would not be penalised by the protective award of £30,821. 

The EAT did, however, note that there might be cases where basic salary formed such a small part of the basic remuneration that failing to include discretionary arrangements in a weeks’ pay would mean the protective award was not a sufficient deterrent.  Furthermore, if the bonus had been non-discretionary, then the bonus would more likely than not have been included in the calculation.