What are you thoughts about an ex gratia payment to a retiring Parish Clerk?

Question

I'd be interested to hear your thoughts about giving a Parish Clerk an ex gratia payment on their retirement after 21 years of service.

The situation is that the Clerk was employed in 2003 with a very poorly written contract that didn't mention anything about a pension or gratuity.  In 2022 the then Parish Council decided to set up a gratuity arrangement for the Clerk, back dated to 2003. That decision was minuted, and since then the calculation has been revised each year so there's an earmarked reserve for the gratuity on the Clerks retirement.

Recently it was realized that gratuities were made illegal in 2012 unless there was an existing contractual obligation to give one - which in this case there was not. On the advice of a legal employment adviser the gratuity arrangement was rescinded.
The Clerk is now about to retire. Some of the present councilors think the promise of the previous council should be honored by giving the Clerk the earmarked reserve of money as an ex-gratia payment.

Should the Clerk be given the ex gratia payment or not?  There's a bit of a moral dilemma here with opinions both ways, both by Councilors and parishioners. Essentially the Clerk would be receiving money that comes from our parishioner's council tax.
What do you think?

Answer 1

I think this is one where you're going to need some specialist advice.  On first appearances, I'd question why provision was not made to automatically enrol the clerk in a pension scheme in accordance with legislation?  Or did he/she rely on the previous promise of a gratuity and opt out of the pension scheme?  Legally, parish councils should be providing for and paying a contribution towards a pension scheme for qualifying employed staff and whilst it was common practice to make provision via a gratuity years ago (when your clerk was first employed), this should have been addressed when the law changed albeit existing arrangements were specifically excluded from the rule that a gratuity could not be given for contracts entered into after the change in rules.  I'm surprised at the comment that the original contract was not clear as the model contract from that time did clearly make provision for a gratuity or pension.  Where a gratuity was indicated, councils should (but many didn't) set up an earmarked reserve to make the payment when due and there was an accepted formula for setting the amount each year.  Did your council, in recognition of their failure to make appropriate provision for this payment, then set this up in 2022?  This would be quite different from establishing the right to a gratuity in 2022.

Comments

As I said, the original contract was poorly written. Nothing like a model contract, and probably illegal at the time. A mistake by the then PC and the completely untrained Clerk they were employing, then aged 65.
As far as I can tell from past minutes there’s nothing in writing before 2022 about a gratuity; it was set up from scratch in 2022, back dated to 2003. Legally, this was another mistake by the Council at that time, and the still untrained Clerk, who was by then aged 84. An earmarked reserve was started from then, and stands at ~£3000.
Please correct me if I’m wrong, but one justification for the Clerk never having been enrolled in a pension is that she was already beyond state retirement age when she was first employed as Clerk in 2003. Moreover, with only 4-5hrs work per week her salary is below the level that automatic enrolment in a pension is needed. This is a small parish.

You suggest getting advice. From whom? An employment law adviser?

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The additional information is helpful, thank you and it does change matters.  Pensions are a complex area.  Yes, an employment law adviser would be worth the payment but from the additional information I'd say that your decision in 2022 was not in accordance with the law at that time and therefore unenforceable (the word illegal isn't really appropriate but a court wouldn't support an application to enforce a decision which was contrary to the law at the time).
Pensions are yet another example of where recent legislation imposes responsibilities on councils that they are often ill equipped to address but getting it wrong - even if innocently or with the best of intentions - can be expensive and difficult to resolve.

Answer 2

Your clerk (of such long service) as a PAID employee with statutory responsibility for providing sound legislative, legal and procedural advice to the council wasn’t, it could be observed, doing their job - but way worse than that - they have actually created, by professional omission, a serious headache for the current Cllrs
If it were me - I would feel no moral obligation for the failure of former Cllrs to properly manage the clerk nor would I support a tax payer funded hush payment
That said - get this wrong and you’re in a hole - get professional advice!

Comments

Both you and DW suggest getting professional advice. From whom?  An employment law adviser?

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Start with a general question to your PCs insurance provider. There may (should) already be an element of legal advice provided within your policy - but this could be dubious at best given the apparent lack of procedural awareness you describe.
Cllrs “should” be aware of the general conditions of a PCs insurance policy before voting for the annual renewal.
If nobody knows what your insurance already covers then that goes some way to explaining why and how the PC has allowed this situation to perpetuate.
Get YOUR query on record as soon as possible. Get it minuted as a formal question that YOU have raised. That is the only way you can distance yourself from what appears to be long standing incompetence .

First - raise your question formally as an agenda item on the record.
Second - either get council approval to contact the insurer or ensure that “somebody” else does (preferably NOT the clerk since they have vested interest)
Third - raise your personal concern to the internal auditor.
Not necessarily in that order, but those are the actions I’d be taking….

Answer 3

I think the position is quite clear.  There is no contractual reason to make a payment.  Without a contractual reason, such a payment would not be lawful.  As it stands, the council cannot/should not make a payment.

The council could, with employee consent, implement a new employment agreement which includes such a payment.

There are risks with this approach and it would be best to consult with an employment law specialist to mitigate them, but this would be the cleanest way to make the payment lawfully.