Equal treatment in redundancy packages: why each benefit matters

When employment ends, the headline figure is usually the cash. Equal pay law looks further. In Barber v Guardian Royal Exchange Assurance Group (C-262/88), decided by the Full Court of the Court of Justice on 17 May 1990 under President O. Due, the Court held that equal pay reaches the benefits paid on redundancy, including occupational pension rights. The case came as a preliminary ruling on a reference from the Court of Appeal in London. The Court interpreted EU law and fixed no compensation.

The redundancy dispute

Mr Barber was a member of his employer’s pension scheme, which was wholly financed by the employer and contracted out of the earnings-related part of the UK state scheme. He was made compulsorily redundant at 52. Under the employer’s severance terms, a scheme member made redundant received an immediate pension from 55 if a man and from 50 if a woman. Mr Barber received cash benefits, a statutory redundancy payment and an ex gratia payment, but only a deferred pension payable from 62. A woman in the same position would have received an immediate pension, and the total value of her benefits would have been greater. After his claim failed at two instances, the Court of Appeal referred questions to the Court of Justice.

The Court’s ruling

Benefits paid by an employer in connection with compulsory redundancy were pay under Article 119 of the EEC Treaty (now Article 157 of the Treaty on the Functioning of the European Union), whether they were due under the contract of employment, under legislation or paid voluntarily. A pension paid under a contracted-out private occupational scheme also fell within the equal pay principle. The scheme’s sex-based age conditions were unlawful, and equality had to be assessed for each element of remuneration, not for the package as a whole.

For pensions, the Court limited the effect of its ruling in time. Article 119 could not be relied on to claim entitlement to a pension with effect from a date before the judgment, 17 May 1990, except by workers, or those claiming under them, who had already started legal proceedings or raised an equivalent claim under national law.

The continuing legal context

The EU now deals with equal pay and occupational social security in the same piece of equality legislation. Directive 2006/54 requires the elimination of sex discrimination in all aspects and conditions of remuneration for the same work or work of equal value. Its provisions on occupational schemes deal separately with access, contributions, the calculation of benefits and the retention of entitlements.

Historical pension claims need particular care. Article 12 of the Directive applies equal treatment in occupational schemes to benefits derived from periods of employment after 17 May 1990. For a Member State that joined the EU after that date and was not part of the European Economic Area on 1 January 1994, the Barber date is replaced by the date on which the Treaty’s equal pay article became applicable in its territory. For Malta, which joined on 1 May 2004, that is the date of accession. The Barber date should therefore not be used as the starting point for a Maltese pension calculation. What matters are the periods of employment concerned and the time limits for bringing a claim. For the wider position on pay, see equal pay and the 2026 pay transparency rules.

Relevance to Maltese pension arrangements

Malta’s Equal Treatment in Occupational Social Security and other Pensions Schemes Regulations (S.L. 318.20) give effect to the relevant provisions of the Directive. Their scope includes occupational schemes that cover early retirement, subject to stated exclusions. They prohibit discriminatory treatment in access, contributions, benefits and the retention of entitlements, and list different retirement ages among the prohibited provisions.

The regulations also require those managing a scheme to observe equal treatment when benefits are discretionary. Describing a decision as discretionary does not, on its own, answer the equality question. The particular scheme still has to be examined, because the regulations contain exclusions and specific provisions on actuarial factors. Occupational benefits should also be kept apart from statutory state pension entitlements.

Significance for executive exits and workforce restructuring

For an executive negotiating a departure, the practical starting point is a schedule of the rights affected. Cash severance, access to an occupational pension and the retention of deferred benefits raise different questions. The value of each item, its eligibility conditions and the date on which it becomes available should be visible before the parties settle on a headline figure. The guide to reviewing a proposed exit agreement covers the other terms to check, and notice and exit terms explains what an exit package usually contains.

For an employer designing a restructuring, the same schedule can support a comparison of how the arrangements affect different employees. A consistent cash formula may leave important differences elsewhere in the terms. The review should identify the relevant comparators and the reason for each difference, while keeping the applicable legal test in view.

These are practical applications of the equality issues discussed above. They do not mean that every departing employee must receive an identical package. The concern here is unequal treatment based on sex in comparable circumstances, not a general prohibition on individually negotiated exits.

In settlement discussions, the useful distinction is between valuing a package and establishing the rights it contains. A financial estimate helps the parties understand an offer. It does not replace a separate examination of entitlement, eligibility and equal treatment. Keeping those questions distinct makes the basis of an agreed exit clearer.

For senior executives, a review of the whole package, item by item, shows what is being given up and what remains open to negotiation. See executive exits.

For employers, checking each element of the redundancy terms before they are offered reduces the risk of an equal pay challenge later. See workforce restructuring.

To discuss a proposed departure or restructuring, send a confidential enquiry.