Council ordered to make £1m pension back payments


A Scottish council has been ordered to make pension back payments to hundreds of female employees following an equal pay settlement, in a ruling that could have far-reaching consequences for other local government organisations.

North Lanarkshire Council has been ordered by the Scottish Public Pensions Agency (SPPA) to make pension contributions of around £1 million on back pay awarded in previous equal pay claims against it.

This follows recent local government pension regulations stating that all back pay must be treated as pensionable.

In the original case, 681 women were awarded back pay by the council after it was deemed they had been doing equal work to their male counterparts for less pay. The women then reached a second negotiated settlement worth £7.1 million after being represented by equal pay experts Action 4 Equality Scotland.

However, their final salary pension deals remained below those of male counterparts, as their contributions were lower while they were underpaid. The council originally claimed the second round of back pay was a form of negotiated compensation and therefore not pensionable. However, the SPPA has now ruled that this is not the case. It said the council must pay the income tax and national insurance on the second wave of back pay, as well as employer contributions.

The council has until 20 August to decide whether to fight the decision.

A spokesperson for North Lanarkshire Council said: “The original offers of settlement recognised that a clarification of the pension contributions position was required given there was no consensus at the time of the settlements. We note the decision of the Scottish ministers in this case. We are examining the decision and will reach a decision on our next steps in due course. However, the council remains committed to equality and has settled more than £100 million worth of claims. We will continue to do so where these are justified.”

Karl Bromley, manager at Action 4 Equality Scotland, said: “We have been challenging the decision of the council for more than a year now in relation to any settlement money being treated as pensionable earnings.

“The issue we have now is trying to get North Lanarkshire Council to provide the pension authority with a breakdown in the increase in earnings and making the necessary contributions in relation to it.”

He said Action 4 Equality Scotland has also been involved in recent equal pay settlements with several other Scottish councils, including South Lanarkshire, Falkirk and Fife.

“We believe the outcome of [the North Lanarkshire case] could have an impact on all of those areas. We have requested that they treat any payments as pensionable but we are yet to have a successful payment to the SPPA,” he added.

Hazel Nolan, GMB regional organiser, said the North Lanarkshire case was not unique, though it had been more complex than others. “I hope that other councils will reconcile the disparity between how they value women’s work, and carry out proper evaluations to ensure that we are eliminating the gender pay gap,” she said.

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