This page explains the context of the agenda item 080724/5a that was addressed at the West Wratting Parish Council meeting on Monday 15th July 2024.
080724/5 Council business:
(a) To vote on Termination payment to outgoing Clerk.
Introduction
In 2022 the then Parish Council decided to regularly put money aside towards a “gratuity” that would be paid to the Parish Clerk on her retirement. In 2023 new councillors realised that paying a “pension” that way was made illegal in 2012. Moreover, calculation of the backdated gratuity amount incorrectly included years in which the clerk was self employed. The gratuity arrangement was rescinded at the next parish council meeting, and advice was sought from employment law advisers.
A more detailed description of the background to this issue can be found in the appendix, below.
Email from CAPALC employment law advisers
Here, in full, is the final email we received from the employment law advisers that provide their service ‘free’ to our parish council as part of our membership of CAPALC. This email was the outcome of many emails and telephone conversations to explain the situation.
from: CAPALC capalc@worknest.com
to: "wwparishcouncil6@gmail.com" wwparishcouncil6@gmail.com
date: Jun 10, 2024, 4:33 PM
subject: Confidential - Case Number 415088
Good afternoon Simon
Further to our call, I can confirm the following.
- The money should not have been offered to [your clerk] as it was illegal some 10 years to do that and the Councillors should all be advised on what they can and can’t offer in line with their legal obligations going forward to avoid the difficult situation the council is in. It did not align with standard protocols or specific provisions that govern such payments within the public sector framework. And there is concern that any payments made are supported by policy or law to avoid being perceived as a misuse of public money as that could not only damage the trust between the public and the Council, but it could affect the credibility of the organisation’s financial management. It is to be applauded that due diligence is now being done to ensure money is spent in line with government guidance. I am sure any auditor would take into account that it was recognised the matter needed to be addressed and that appropriate action was then taken. And it would be in the public interest to ensure that this doesn’t happen again, of course and that due diligence is done on what public money can be spent on (or not).
- However, you are where you are with an offer made in error. This offer was still made – and that was accepted, and that has formed a contract between the two parties which, if not honoured, will either result in a breach of contract claim or a tribunal claim for breach of contract and an unlawful deduction from wages claim. There is clear evidence that this was set up as a gratuity for a payment pre-retirement that was voted on at the time and it is also documented in emails and minutes. An employment contract in the UK is defined as an agreement between an employer and an employee. Importantly, a contract of employment does not have to be written to be legally valid. It can also be verbal or implied, provided there is an agreement to that. You could try and argue it was an illegal contract and therefore not legally binding, but it is not in the public interest to do that as that would cost more in legal fees than it would be to pay it
- As there is statutory guidance on special severance payments that makes it clear that these can’t be used to end a contract but they can be utilised if a Council has to honour something contractual that was in place or offered prior to 2012, I see no reason why you cannot rely on that statute to make the payment given point 2. An auditor would have to show that you spent money unlawfully, that you spent it without the powers to do so – and here, you have the power to spend money so there should be no issues as nor could it be argued that the decision to spend the money here – given the potential costs to the council in terms of bad publicity, court costs etc (the average tribunal case takes between 60 and 120 hours and if it was our preferential rate of £180 per hour plus VAT, that is a still a considerable amount of money and is hugely disproportionate to the amount involved) was either wholly unreasonable or irrational – and unreasonable is defined in these circumstances as a decision that no reasonable person would have made that decision. It would also be part of your duty to commit to securing value for money for the current council given poor decisions made by the previous council.
- In relation to any tax payable on the sum in question, as Laura advised, this falls outside our area of expertise and you need to take specialist financial advice in relation to this,.
The auditor guidance for public authorities can be found here – https://www.nao.org.uk/wp-content/uploads/2022/08/Council-accounts-a-guide-to-your-rights.pdf
If you have any further questions, please do not hesitate to contact the team quoting the case number above.
Kind regards
Caroline Johnstone
Senior Employment Law Adviser
Email to the Monitoring Officer
Email was sent to the monitoring officer at monitoring.officer@scambs.gov.uk to ask for advice, explaining that one of the WWPC councillors strongly believed that paying the gratuity would go against government advice and break the code of conduct. We did not receive a reply.
Rational of Cllr S Chandler
My decision to vote for the motion to pay our outgoing Clerk a termination payment equal to the value that had previously been promised by a previous parish council was not taken lightly. The key advice from CAPALC’s employment law adviser that drove my decision was:
- The previous parish council should not have offered the gratuity in 2022 because at that time it was illegal to do so and was not in line with local government policy. In addition, the payment was backdated to a time when the Clerk was self-employed, so the calculation of the amount owed was not correct.
- However, in making the offer, and documenting the agreement in council minutes and emails, a contract was established.
- Trying to argue that the contract was illegal and therefore not legally binding would not be in the public interest because that would cost more in legal fees than it would to honor the gratuity.
- It is part of our duty to commit to securing value for money for the current council, even given poor decisions made by a previous council.
- An auditor is unlikely to conclude that spending public money on the termination payment was unlawfully and beyond the council’s power.
This outlines the reason I decided to vote to give the termination payment to our outgoing Clerk. I do not claim that the other councillors used the same logic to arrive at their decisions.
In future there will be greater due diligence to ensure that decisions made by West Wratting Parish Council are aligned with government guidance and law.
Simon Chandler
Rational of Cllr McKenna
This section will explain why Cllr McKenna voted against making a termination payment to the retiring Clerk. This still needs to reviewed by Cllr McKenna, but this is distilled from his previous emails to me:
I think it is important to thoroughly examine the historic and legal facts not only with regards to the Clerk’s employment but also the legal obligations of the parish council to provide a workplace pension.
From what I understand the parish council has never been legally obliged to automatically enroll their Clerk into a workplace pension scheme. The automatic enrolment did not become law until Oct 2012 with smaller employers not having to follow suit until 2018.
It is not a matter of whether or not I believe [payment of a gratuity] to be illegal – it was/is illegal to make gratuity/ex-gratia payments to parish clerks as of year 2022.
The calculation made at the time (2022) did not take account of the fact that the clerk was self employed for approximately 8 years prior to the time employment law changed and employers had to automatically register employees onto their pension schemes – assuming that they meet the requirements at that time, which clearly [our clerk] did not.
As we know, employment Law will always err on the side of the employee, whereas if this was challenged in a court of law or an employment tribunal it remains a fact of law that you can not include within a contract – be it contractual or employment – something which is in direct conflict to statute law in place at that point.
It goes without saying that I do not wish to place the parish council in a situation which undermines its credibility, however my views, observations and research regarding this particular matter cannot be ignored. I cannot and will not condone such misuse of tax payers money in a seemingly flippant manner. My moral obligation is to the circa 200 parishioners of West Wratting over and above one individual.
The outcome
As noted in the minutes of the parish council meeting of 15th July 2024
080724/5 Council business:
080724/5 a) It was resolved to pay the former clerk a sum of £2911.47 ex gratia in lieu of a Clerk’s gratuity (the former method of paying a clerk’s pension). Cllr McKenna objected. The context of this agenda item and an explanation of the voting can be read at https://westwratting.org.uk/080724-5a/
Action for Clerk.
Appendix: Background to this issue in more detail
At one time gratuities were a pretty standard way that Clerks were paid a pension. In 2012 the law was changed to encourage the use of more modern pension schemes. This change is described in the attached Legal Topic Note from NALC (LTN 34). That note explains that Clerks and their Councils could continue to have a gratuity arrangement if it was already in their contract, as I believe was the case for our Clerk’s contract with West Wickham; however her contract with West Wratting had very little detail and does not say anything about a pension.
In 2022 somebody realised that a pension had been missing from our Clerk’s contract with West Wratting, all the way back to 2003 when she started. To that Council and the Clerk it seemed sensible/easy to just copy what was already on her contract with West Wickham (where she’d started as Clerk at about the same time as West Wratting), using the same calculation and backdating it to 2003. The calculations were done to determine what should have been accumulated into the set-aside money for the gratuity, and that pot has been topped-up since then, leading to the current value (as of end 2023) of £2911.47.
Calculation of the gratuity was done by West Wickham (and then by West Wratting) using the method that was recommended in the Local Government Superannuation (Discretionary Payments) Regulations 1996 which was summarised in the 2007 edition of Local Council Administration by Charles Arnold-Baker (i.e., “the yellow book”). That was the edition that the West Wratting Clerk was still using in 2022.
A WWPC councillor was asked in 2022 to check the Chair’s calculations of the gratuity. After doing some research he advised the WWPC Chair (email on 9 August 2022) that the 1996 scheme was abolished in 2012 in favour of pensions, quoting documents E07-11 Repeal of the Local Government (Discretionary Payments) Regulations 1996 and E01- 12 Repeal of the Local Government (Discretionary Payments) Regulations 1996 – NALC and SLCC model
employment Contracts. He strongly advised that professional advice was sought from CAPALC. That closing advice was sent together with re-calculation of the gratuity, which said:
Assuming that the Parish Council has an obligation to arrange a gratuity (which I can’t find any evidence for) then using the rate of 3.75% as per the 1996 regulations, the calculation is straightforward;
the Clerk’s current salary is £3016.18.
The current gratuity (if applicable) stands at 18.42 x 3.75 x 3016.18/100, a gratuity of £2,0835.43
Since August 2022 the gratuity has been revised annually, leading to the current figure of £2911.47
The Parish Council Chair from 2022, who set up the gratuity, still maintains that it was all done legally.
In 2023 there was a big change of councillors on West Wratting Parish Council. They realised there was an issue with the existing gratuity arrangement, so it was annulled at the Parish Council meeting on Monday 11th March 2024 in agenda item 7e.
7e) Parish Clerk’s gratuity: The proposal was that the gratuity that was set up in September 2022 be rescinded because, having checked with CAPALC, paying “pensions” via that method was not permitted after changes in legislation in 2012. Chairman proposed, seconded by Cllr O’Donovan, carried by majority vote. The Parish Council hopes to find a legal way to honour the original gratuity endeavour. The Parish Clerk will seek advice on how this can be achieved.
The clerk did not seek advice, but the Chair did. After a lot of email and telephone communication with the Senior Employment Law Adviser from Worknest Law, who are contracted by CAPALC/NALC, they arrived at the conclusion shown in full above.
As you can appreciate, this has taken me many hours to unravel. At root, it was caused by previous Parish Councils not following correct procedures and practices. You can’t entirely blame the Councils for this, because they should have been advised by their clerk about details of those laws. This problem is a good example of why Parish Councils need to ensure they are receiving guidance from a trained Clerk.