Act

Complaint Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under section 6 of the Payment of Wages Act, 1991

CA-00007278-001

30/09/2016

This complaint concerns the removal of a contractual entitlement to the provision of health insurance.

The complainant claims that as part of her contract under the heading “remuneration” she was entitled to the respondent paying for her medical health insurance. She claims that the respondent ceased paying that element of her wages as of 30 April 2016. She claims that this amounts to an unlawful deduction from her wages.  

The respondent claims that it did pay for the complainant’s medical health insurance for a period of time. However, due to dire financial difficulties it sought to buy out its employees’ private health insurance cover. The respondent said that the benefit provided was not wages but a ‘benefit in kind’ which does not fall within the definition of ‘wages’ as provided for under the Payment of Wages Act, 1991.

The complainant claims that she commenced employment on 10 June 2002 with a company that was subsequently acquired by the respondent and she transferred to the respondent pursuant to a transfer of undertaking under the EC (Protection of Employees on Transfer of Undertakings) Regulations 2003.

She claims that her remuneration is composed of both gross salary and Health care membership. The remuneration clause in her contract reads as follow: “Your gross salary will be €16,500 per annum. Payment will be made each month in arrears by credit transfer. Your V.H.I membership will be paid by the company in full. This will be Plan B – 28 units.”

She submits that the respondent unilaterally withdrew her contractual entitlement to the provision of health insurance in April 2016. She said she was contacted by the respondent in or around September 2015 and advised of its intentions and that she was entitled to one of two buy-out options. Option 1 - 60% of the value of the premium to be added to her annual base salary (€1,200) with twice the remaining value (40% x 2 = €1,600) being paid as a lump sum or Option 2 - twice the value of the premium (€4,000) to be paid as a once off lump sum. The complainant was advised that Option 2 would be considered the ‘default option’ should she fail to inform the respondent by the 1 October 2015. The buy-out which amounted to a significant loss for her was to be made on the renewal date of the policy.

She claims that she challenged the legality of the respondent’s actions and sought confirmation that her health insurance would not be cancelled. She said that she was not afforded any opportunity to negotiate with the respondent and did not select an option. She said that the respondent invoked the default option, Option 2. She said she attempted to engage with the respondent on the matter through her solicitors but to no avail.

The complainant claims that in accordance with Section 5(1)(c) of the Payment of Wages Acts, 1991 it states that “An employer shall not make a deduction from the wages of an employee (or receive any from an employee) unless – in the case of a deduction, the employee has given his prior consent in writing to it.”

The complainant cited the definition of ‘wages’ from Maeve Regan’s Employment Law book from page 340 paragraph [11.14], which reads “Wages are a sub-set to ‘pay’ when given the wide ECJ meaning. The meaning is defined [in the Payment of Wages Act 1991, s 1.] in Irish law as:

… any sums payable to the employee by the employer in connection with his employment.

The use of the phrase ‘in connection with’ is very wide. This is expressed to include:

(i) any fee, bonus or commission, or any holiday, sick or maternity pay, or any other emolument, referable to his employment, whether payable under his contract of employment or otherwise, and

(ii) any sum payable to the employee upon the termination by the employer of his contract of employment without his having given to the employee the appropriate prior notice of the termination, being a sum paid in lieu of the giving of such notice.”

She went on to refer to the recent appeal to the High Court in the case of Devidas Petkus and Others -v- Complete Highway Care Limited [2015 No. 76 MCA] in relation to an adjustment to the employees pay whether it was a reduction or a deduction and whether it was lawful.

The complainant claims that the employer in this case made a unilateral decision to make a deduction of her health insurance from her remuneration.

The respondent submits that it recently experienced a threat to its long-term viability and as a result introduced a plan to return to sustained profitability and inject significant capital into the company. All employees were impacted as significant cost saving initiatives including redundancy were undertaken. As part of the same the respondent sought to buy-out private health cover for its employees. It gave seven months’ notice to all, engaged directly with employees through face to face company briefings and individual correspondence and provided a choice of generous buy-out options. The buy-out options were agreed in advance with the employee’s trade union which represents the majority. It wrote to its members explaining that the buy-out in the circumstances in which the company found itself would be considered generous by the Labour Court.

The respondent claims that it received an email from the complainant requesting confirmation that the Health Insurance would not be cancelled, to which it replied explaining again the rationale for the decision. It claims that since the complainant did not select the option she wished to exercise, the default option, Option 2 was applied and was processed in the April 2016 payroll.

The respondent claims that section 1 of the Act defines ‘wages’ and excludes from that definition ‘any payment in kind or benefit in kind’ and therefore the issue in dispute here is in relation to the payment of Health insurance, which when paid by the employer under contract is a benefit in kind and not wages in the definition of the Act. Additionally, it claims that it is treated as such in the Revenue Commissioners code [5.1.18 Employer-Paid Medical Insurance Premiums], which states that “where an employer pays medical insurance premiums on behalf of an employee and/or his or her dependants, a benefit in kind charge will arise. PAYE, PRSI and Universal Social Charge (USC) will be deducted by the employer in respect of the value of the benefit provided.” The respondent said that this is supported by the way that the medical insurance was treated on the complainant’s monthly pay slip, where it states that the deduction is a benefit in kind.

The respondent claims that under Section 41(6) of the Workplace Relations Acts, 2015 an adjudication officer shall not entertain a complaint referred after the expiration of 6 months beginning on the date of the contravention. The respondent said that in the 6-month period prior to taking the case to the Workplace Relation Commission under the Act – 1 April 2016 until 30 September 2016 - the complainant had received full value of the health insurance premium either by lump sum or an addition to her base salary, therefore there was no deduction from the complainant’s wages in the relevant period.

Section 1 of the Payment of Wages Act, 1991 at Interpretation states that

“1. — (1) In this Act—

…

“wages”, in relation to an employee, means any sums payable to the employee by the employer in connection with his employment, including—

(a) any fee, bonus or commission, or any holiday, sick or maternity pay, or any other emolument, referable to his employment, whether payable under his contract of employment or otherwise, and

(b) any sum payable to the employee upon the termination by the employer of his contract of employment without his having given to the employee the appropriate prior notice of the termination, being a sum paid in lieu of the giving of such notice:

Provided however that the following payments shall not be regarded as wages for the purposes of this definition:

(i) any payment in respect of expenses incurred by the employee in carrying out his employment,

(ii) any payment by way of a pension, allowance or gratuity in connection with the death, or the retirement or resignation from his employment, of the employee or as compensation for loss of office,

(iii) any payment referable to the employee's redundancy,

(iv) any payment to the employee otherwise than in his capacity as an employee,

(v) any payment in kind or benefit in kind.”

Having heard and considered all the submissions and the evidence from both the parties, I am satisfied that the first consideration that I must address relates to whether the payment of the Health insurance falls within the definition of ‘wages’ under the 1991 Act. Should I find in favour of the complainant I will proceed to address the other particulars raised in relation to the case, should I find in favour of the respondent here I need not address the other issues raised as the complaint will be deemed not well founded.

The complainant is clear that the payment of her health insurance is listed as part of her remuneration in her contract and therefore forms part of her wages. I note that the respondent claims that the payment of the complainant’s health insurance was a benefit in kind and therefore is not included within the definition of wages under Section 1 of the Act.

Firstly, I note in the case before me for consideration that the respondent paid for the complainant’s healthcare insurance on a monthly basis and that was recorded on the complainant’s monthly payslip as (BIK) in other words benefit in kind. This was the full payment of a set corporate healthcare insurance plan and it was not a payment that could be drawn down and used elsewhere or for other schemes.

I note from the Revenue Commissioners own website where they define what benefit in kind is and it states that “A benefit-in-kind (BIK) is any non-cash benefit of monetary value that you provide for your employee. These benefits can also be referred to as notional pay, fringe benefits or perks. The benefits have monetary value, so they must be treated as taxable income. You must deduct Pay As You Earn (PAYE), Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) from your employee’s pay on the value of a benefit.”

I have also noted that the Revenue Commissioners have addressed the matter of medical insurance premiums, it states,“where an employer pays medical insurance premiums on behalf of an employee and/or his or her dependants, a benefit in kind charge will arise. PAYE, PRSI and Universal Social Charge (USC) will be deducted by the employer in respect of the value of the benefit provided.” (my emphasis)

In these circumstances and having considered the case I see that the Revenue Commissioners determine that the payment of medical insurance premiums as a benefit in kind. From the ordinary meaning of the wording set out in the definition of ‘wages’ in Section 1 of the 1991 Act it is clear that - “… the following payments shall not be regarded as wages for the purposes of this definition … (v) any payment in kind or benefit in kind.” – therefore it is clear that benefit in kind is not to be considered as wages under the definition of the Act.

Accordingly, I find that from the evidence adduced and from the plain and simple reading of Section 1 of the 1991 Act and the relevant Revenue Commissioners codes in relation to the same, that the health insurance benefit originally provided by the respondent to the complainant and now withdrawn does not constitute wages within the meaning of the Act and accordingly that the complaint must fail.                

The complaint is not well founded.

Payment of Wages Act - health insurance - benefit in kind - definition of wages