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Education HR e-briefing 576: Pay freeze did not affect employees' entitlement to pay increase

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    The EAT, in Cabinet Office v Beavan and ors, held that pay increments determined according to length of service, negotiated along with a two-year pay deal, were intended to apply beyond the two years of the pay deal. Consequently, a pay freeze applied did not affect the claimants’ entitlement to the pay increments.

    The facts

    The claimants’ salary increases are the subject of negotiations between the Cabinet Office and the relevant trade unions. The resulting collective agreement is expressly incorporated into each individual contract of employment.

    The 2008 pay round culminated in a letter to the union headed ‘OGC pay final offer’ (the 2008 letter). Although the letter did not have the status of a collective agreement, it was affirmed by conduct and could therefore be construed in the same way. That letter included three elements:

    •   pay bands;
    •   guaranteed pay progression points after two, four, six and eight years’ service; and
    •   a pay increase for both 2008 and 2009.

    The Treasury imposed a pay freeze on public sector workers from 1 August 2010.  The claimants claimed that, in spite of the pay freeze, they were entitled to increases in pay referable to the guaranteed pay progression points.  The Cabinet Office argued that the 2008 letter was simply an agreement for 2008 and 2009 and that this was apparent from the letter.
    The issues

    The claimants claimed that the Respondent had unlawfully deducted wages to which they were entitled under their individual contracts of employment, which incorporated the collective agreement.  The case turned around the proper construction of the 2008 letter. Was there, following the 2008 pay round, a contractual entitlement to certain incremental pay increases by reference to the pay progression structure? 

    Employment Tribunal

    The Employment Tribunal asked itself what the parties would reasonably have been understood to mean. By way of example, the Judge noted that the letter stated: “..the offer covers a two-year period”, but further referred to ‘a series of guaranteed progression points’.

    The Tribunal held that, on any reasonable interpretation, the pay progression was not only guaranteed but intended to continue beyond the two year pay deal; that it was an entirely separate deal from the normal percentage increase on the standard base pay; and that it was intended to reward and offer financial incentives to retain longer-serving members of staff. The claimants therefore suffered an unlawful deduction of wages.

    The appeal

    The Cabinet Office appealed on the ground that the Employment Tribunal had erred in its construction of the agreement.  It contended that the 2008 letter set out what was agreed for a two year period only because the pay increase agreed at that time was to last only for 2008 and 2009.

    Decision of the Employment Appeal Tribunal (EAT)

    The EAT upheld the Tribunal’s decision. On its true construction, the 2008 letter concerned two distinct subjects: the pay increase for staff generally, which was limited to a two-year period; and the introduction of guaranteed pay progression points which was not limited to those two years. The EAT noted that it is not unusual for structural arrangements or other changes to be made in the context of, perhaps, an annual pay round, or for those changes to have effect beyond the terms of the particular pay increase which is agreed at the same time. The appeal was dismissed.


    Employees, ordinarily, are entitled to be paid the agreed remuneration in their individual contract of employment in return for the work they have agreed to do.  Often their contract will contain a clause which incorporates by reference increases in salary negotiated at a collective level.  If and when such an increase in salary is agreed, it will then become a term of each individual’s contract. 

    Employers can use this negotiation to renegotiate other features of the employment relationship such as hours of work, holiday arrangements, or, as in this case, pay progression.  In theory, individual employees do not have to accept the terms being imposed, but, ordinarily, will readily accept in order to obtain the pay increase.  No employer has a right to unilaterally impose a fundamental change to an employee’s terms and conditions.  In theory, at least, the employee could elect to continue to be paid the old rate because he or she does not wish to agree the new terms and conditions.  Consequently, there is not necessarily any connection between pay and an agreement about other terms and conditions. 

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