Employer not obliged to award pay increase despite pay progression clause

Employer not obliged to award pay increase despite pay progression clause

In a recent case involving a public sector employer, the Employment Appeal Tribunal (EAT) considered whether an employer had acted in breach of contract when it failed to operate a pay progression clause which expressly provided for an annual pay review.

Although the employee was contractually entitled to a pay review, she was not entitled to annual pay increments since the pay progression clause in her contract made it clear that there was no obligation to award a pay increase.

The employer was government-funded and was compelled to introduce a pay freeze.  It therefore decided not to conduct a pay review for its staff.  Although this decision was a breach of contract, since staff were entitled to a pay review, it was clear that the employee would not have been entitled to any incremental increases had the pay review been carried out.

This case demonstrates clearly that a tribunal should look at the precise wording of the contract in each case.  Whilst some pay progression clauses provide for automatic increments, conditional only on performance, the clause in this specific contract was not one of them.

In a context where many schools and academies abide by local authority pay protection schemes and performance-related pay for teachers has been introduced, it is more important than ever for employers to consider their contractual obligations and follow the wording of any contract or policy. The decision suggests that employers should always conduct a pay review where the contract provides for one, even where a pay rise will not be awarded.

Whilst autonomy over pay can provide greater freedom, it is important to ensure that your contractual terms work for you, especially in relation to teachers since the recently introduced flexibility is so new.