Select Committee on Standards and Privileges Fourth Report


Appendix 4: Extract from a letter to the Clerk of the Committee from the Director of Operations, Department of Resources, 21 January 2008


Mr Derek Conway MP

You asked me to calculate the bonus overpayment to Mr Freddie Conway during his employment with Mr Derek Conway. Sir Philip Mawer's report to the Committee on Standards and Privileges mentioned a gross figure of £4,620 (excluding pension contributions) which was provided by me in my letter of 7 December 2007. However this has changed somewhat as more information has come to light.

The rule in the Green Book is that "Bonuses paid during the year may not exceed 15% of that employee's gross annual salary received in the year". For these purposes the year is the relevant financial year. Typically Members award bonuses towards the end of the year and therefore their 'gross annual salary received' is effectively their annual rate of pay. A Member awarding a mid-year bonus should limit this to 7.5% of the gross annual salary: in other words, 15% of the salary received up to that point in the year. This is relevant to Mr Conway's situation as will be shown below.

I can confirm that Mr Freddie Conway was awarded four bonus payments, one in the 2005/06 financial year, two in 2006/07 and one in 2007/08. The gross total was £10,065.94. The details are as follows:-

2005/06: £2,000 payment requested on a SA3 form dated 12 September 2005 and received by DFA on 13 September 2005.

2006/07: £5,000 payment requested on a SA3 form dated 17 April 2006, received by DFA on 18 April 2006.

2006/07: £1,300 payment requested on a SA3 form dated 10 January 2007.

2007/08: £5,000 bonus payment requested on a SA2 form dated 2 April 2007, received by DFA on 2 April 2007. Request reduced to £1,765.94 by the Department to reflect the 15% gross salary cap. (At that time in the financial year the salary received was virtually nil, but see below.)

Mr Freddie Conway's rate of pay in each of the relevant years was £11,772.96. He received exactly this amount in 2005/06 and 2006/07; he received £4,683.86 in 2007/08 because his employment ended in the summer of that year. If you were to apply the 15% cap in each year the overpayment schedule is as set out below.

Overpayment Schedule: gross figures

Allowance Year
Basic annual Salary
Allowable bonus (15% of annual salary)
Bonus paid (gross)
Gross overpayment of bonus by financial year
05-06
£ 11,772.96 £ 1,765.94 £ 2,000.00 £ 234.06
06-07
£ 11,772.96 £ 1,765.94 £ 6,300.00 £ 4,534.06
07-08
£ 4,683.86 £ 702.58 £ 1,765.94 £ 1,063.36
 Totals  £ 4,234.46 £10,065.94 £ 5,831.47

I believe this is the best and fairest estimate of the overpayment to Freddie Conway. The sum of £5,831.47 is the gross overpayment to Mr Freddie Conway; the net sum (i.e. cash) received by him as an overpayment after tax and NI was £3,379.81.

Two other calculations are relevant. The sum incorrectly paid from the Staffing Allowance as a result of the bonus overpayments would also include the employer NI, which was £746.43 making a total of £6,577.90. The House would also have paid a pension contribution of £583.15, which means the total cost to the House (Members Estimate) would have been £7,161.05.

To put this in context, when a staff member is overpaid the Department would ask the individual to repay the net overpayment and the Department itself can in most circumstances reclaim the tax and NI overpaid. This approach could reasonably be applied here but with the addition of the pension contribution, giving a grand total of £3,962.96 representing the net cash gain by Freddie Conway. Alternatively it could be argued that the total outflow from the House is relevant, which was £7,161.05.

The principle we use is that the public purse should be restored to the position as if the overpayment had not occurred.


 
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