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Calculating payment for an employee unfairly dismissed is not a complex issue when the person is paid via PAYE, but what happens when the earnings vary according to work and not hours of work ?

Take from this recent example Toni & Guys (St Pauls) Ltd v Georgiou UKEAT/0085/13/DM

“Your earnings are variable and are on a commission only basis and you will receive 34% all your net takings payable monthly in arrears by cheque/credit transfer as detailed on your pay statement. We, however guarantee that your earnings will not fall short of the current minimum wage in force for the hours worked.”

Here the ET tribunal will determine the amount provided for in Part XIV Chapter II of the Employment Rights Act 1996 (ERA). Section 220  “The amount of a week’s pay of an employee shall be calculated for the purposes of this Act in accordance with this Chapter.”

Section 221(3) says if the employee’s remuneration for employment in normal working hours […] does vary with the amount of work done in the period, the amount of a week’s pay is the amount of remuneration for the number of normal working hours in a week calculated at the average hourly rate of remuneration payable by the employer to the employee in respect of the period of 12 weeks ending—

(a) where the calculation date is the last day of a week with that week, and

(b) otherwise, for the last complete week before the calculation date.”

And by section 223(1):

“For the purposes of section 221 and 222 in arriving at the average hourly rate of remuneration, only—

(a) the hours when the employee was working, and

(b) the remuneration payable for or apportionable to those hours,

shall be brought in.”

Note that, if 223(2) If for any of the twelve weeks mentioned no remuneration was payable by the employer to the employee, account shall be taken of remuneration in earlier weeks so as to bring up to twelve the number of weeks of which account is taken.

Where the Employments has no normal working hours, section 224 provides that:.

(1) This section applies where there are no normal working hours for the employee when employed under the contract of employment in force on the calculation date.

(2) The amount of a week’s pay is the amount of the employee’s average weekly remuneration in the period of twelve weeks ending—

(a) where the calculation date is the last day of a week, with that week, and

(b) otherwise, with the last complete week before the calculation date.

(3) In arriving at the average weekly remuneration no account shall be taken of a week in which no remuneration was payable by the employer to the employee and remuneration in earlier weeks shall be brought in so as to bring up to twelve the number of weeks of which account is taken.

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