Telford & Wrekin Council employees were charged unfairly high pension contributions, report says

Telford & Wrekin Council allows employees to give up a portion of their take-home pay in exchange for benefits such as childcare vouchers.

Human Resources manager Sue Wilson told the Personnel Committee that employee pension contributions are based on workers’ pay before the deduction, and participation in the scheme meant some slipped into a lower band but they were still charged as if they had not taken part.

Chief Finance Officer Ken Clarke told members “two or three” council employees were affected by this, but Ms Wilson’s report proposed a rule change to calculate pension contributions based on gross salary to prevent it re-occurring. The committee approved the change.

In her report, Ms Wilson wrote: “The 2013 Local Government Pension Scheme Regulations allow employers to define banding used in the calculation of pension deductions from employees’ salaries.

“Some employees take part in salary sacrifice schemes, for example for childcare vouchers, taking home less salary in exchange for participation in such schemes.

“On occasion this means their actual annual salary falls below a salary banding threshold.

“In order to be equitable it is proposed to amend the current discretion under the Local Government Pension Scheme Regulations to authorise the HR Manager to redefine the elements included in the calculations to stipulate that annual salary is defined as salary post-deduction of any existing salary sacrifice.”

Speaking to the committee, Ms Wilson said: “Some of our employees take advantage of salary sacrifice, for example to get childcare vouchers.

“A couple have found themselves in a situations where, by doing that, they are taking home less salary but their pension contributions are being charged on the higher amount.

“That doesn’t seem fair, really. We would like to take the actual figure of their salary after salary sacrifice, not before it.”

Committee member Bill Tomlinson asked whether the employer contribution would be affected. Mr Clarke said there would be “an extremely insignificant, really infinitesimally small cost to the council” of “a few pounds”, and that the issue “only affects a small number of employees where they are on the cusp of this salary band”.

Cllr Tomlinson added that he was concerned the change would mean affected employees would accrue pension funds at a slightly slower rate.

“If I was an employee, and I was taking the benefit, for a lower salary, I might be able to live with that,” he said.

“But my pension at the end will be significantly possibly lower for those periods of time I was claiming. I would be at a disadvantage.”

Ms Wilson said the benefits and costs of the salary sacrifice scheme were explained to employees when they signed up, and it was their free choice to accept or decline.

Committee chairman Shaun Davies amended the recommendation, saying Ms Wilson should be allowed to make the change “if, after investigation, it is found employees aren’t worse off”, and this was approved by members. Otherwise, the reworded resolution said, the matter would come back to the committee for further discussion.