1. Introduction
Pay in lieu of notice is permitted under Section 7 of the Minimum Notice and Terms of Employment Act 1973, but only where the contract provides for it or the employee consents. Where pay in lieu is given, it must be calculated by reference to normal weekly remuneration including all regular components of pay.
In Carroll v Arena Hospitality Limited the WRC examined the calculation of pay in lieu of notice and found that the employer had failed to include regular shift premiums. This article considers the decision and the wider principles on pay in lieu calculations.
2. Legislation and Case Law
Section 7 of the Minimum Notice and Terms of Employment Act 1973 provides that pay in lieu of notice may be given in lieu of the notice required under Section 4. The pay must be calculated by reference to the employee’s normal weekly remuneration.
The Court of Justice in British Airways plc v Williams C-155/10 held, in the context of holiday pay, that pay must include all components of normal remuneration intrinsically linked to the performance of the worker’s tasks. The principle has been applied by analogy to notice pay calculations.
Section 11 of the 1973 Act confers complaints jurisdiction on the WRC and provides for compensation reflecting the value of the unpaid notice.
Pay in lieu of notice also falls within the definition of “wages” in the Payment of Wages Act 1991, opening a parallel route under Section 5 of that Act where the calculation is in dispute.
3. Decision
The WRC found that the employer had calculated pay in lieu by reference to basic salary alone, omitting regular shift premiums that the complainant had received throughout employment.
Compensation was awarded reflecting the shortfall in the pay in lieu calculation. The decision confirmed that the calculation must reflect all components of normal remuneration, not merely contractual basic pay.
The award was structured to capture the difference between the pay in lieu actually given and what should have been paid had the shift premiums been included.
4. Takeaway
Employers giving pay in lieu of notice should calculate the amount by reference to normal weekly remuneration including shift premiums, regular overtime and commission. A calculation based on basic salary alone may give rise to underpayment.
Employees terminated with pay in lieu should review their final pay against their typical earnings pattern. Where regular components have been omitted, a complaint under the 1973 Act or the 1991 Act may be appropriate.
5. Further information
This article was prepared for informational purposes only. For further advice, please email enquiries@crushell.ie or contact the offices of Crushell & Co Solicitors.
6. About Crushell & Co
Crushell & Co is a specialist law firm focused on protecting and advancing the rights of employees in Ireland. We offer a nationwide service, advising individuals on a wide range of legal and regulatory issues arising at work, including employment law, employment immigration and workplace accidents and injuries.
We help employees understand their position and options by translating complex legal issues into clear, practical advice. Our approach is tailored to each client, ensuring that our strategy is aligned with their personal and professional circumstances.
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