Do we need to pay the acting up salary if the employee has resigned? Adam Partington and Esther Smith advise.
The question: Do we need to pay the extra salary?
A colleague has taken on additional responsibilities with the understanding that there will be a pay uplift at the end of a performance management process. Since that time the colleague has resigned but continues to work on the additional areas. It had been previously agreed that the salary uplift would be backdated to the time when the workload increased. Are we still obliged to honour this agreement?
Adam Partington, solicitor, Speechly Bircham
The first point to consider is whether the pay increase is a contractually binding arrangement. Put very simply a contract requires an offer to be made, for that offer to be accepted and for consideration to pass between the parties in order for a valid contract to be formed. Based on the information supplied in your question above, the offer appears to be the salary uplift in exchange for your colleague taking on additional responsibilities. The acceptance appears to be your colleague agreeing to this proposal. Consideration is where something of value passes between the parties in order for the contract to be binding. In this situation the consideration appears to be your colleague continuing to work and taking on the additional responsibilities, in return for the promise of an increase in salary. A contract can be made orally or in writing.
On the face of it, therefore, it appears that a binding contractual arrangement was reached. If you refuse to pay the individual you could be exposing yourself to a claim from the individual to recover the sums owed.
I should add that contract law can be a complicated area of law and you should take specific legal advice before paying any money to the individual in case there are pertinent facts which might mean the contract is not binding or which might provide you with a basis on which you do not need to pay the individual. You may also discover arguments that mean you could negotiate with the individual on the sum you might pay him.
Assuming that a contractual agreement to uplift the individual’s salary was reached and the individual was an employee or worker, if you refused to pay the individual the uplifted amount the most obvious course of action for the individual to take would be to bring an unlawful deduction from wages claim in the Employment Tribunal to recover the sums owed.
The fact that the individual has resigned would not appear to be relevant unless, for example, a term of the arrangement between the company and the individual was that the individual would not receive the uplift if he resigned.
Finally, if you do not pay the uplift, there could also be wider employee relations implications. For example, it may be difficult to agree with employees to take on extra responsibilities in the future.
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Esther Smith, partner, Thomas Eggar
The contractual terms should be honoured by the company, on the assumption that the performance management process that was to run along side this agreement has been successful. If it doesn’t, then the employee could pursue a claim for breach of contract.
However your enquiry refers to an “understanding” and if this was a verbal agreement, and is not documented, the employee may struggle to enforce what they believe their rights are.
Esther Smith is a partner in Thomas Eggar’s Employment Law Unit. For further information, please visit Thomas Eggar.