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Can Employers Cut Remote Workers’ Pay?

In the US, companies such as Google are developing payment structures that could see a pay decrease for remote employees. Currently, there are no formal plans to extend this to the UK, but these sentiments have reached Westminster, and many businesses here are starting to think about this as a cost-cutting option. But it’s not as straight forward here as it may be in the US, at least from a legal point of view.

The Office of National Statistics (ONS) conducted a recent study and found that for adult workers that are currently working from home, the main advantage of remote working was the improvement of work-life balance and the disadvantage was having difficulties collaborating with others. In comparison, employers gave improved staff wellbeing and reduction in overheads as their advantages and reduction in communication as their disadvantage. This data suggests there are valuable benefits to home-working, which employees may be prepared to pay for.

Cutting remote workers’ pay

Here the employment contract is key and it depends on what was has been agreed upon. In general, an employer cannot unilaterally reduce pay. The Employment Rights Act 1996 protects against an unauthorised reduction in pay, meaning employees can claim for unlawful deductions/breach of contract at the Employment Tribunal. Or if the reduction led to the employee resigning, a claim of constructive dismissal could be brought.

If the contract of employment has a clause that allows for the variation of terms and conditions including pay (a variation clause) an employer may be able to rely on this to reduce pay, but must be exercised with great care (clear business rationale, sufficient notice, consultation etc.) and they will still likely find themselves open to challenge. Most employers would therefore be well-advised to first obtain employee consent to any reduction.

For those employees who are opting to work from home permanently, or on a hybrid model, this will also require agreement from the employer and an update to their written contractual terms. If businesses do attempt pay reductions, they are likely to approach and agree these changes with employees all at once, so there is a bargain to be struck and employees are gaining something at the same time as having something taken away.

Alternatives to pay cuts

Employers may decide the route of cutting pay is too troublesome, and they don’t want to damage their goodwill with their staff. We may therefore see pay reductions in other, more gradual and less transparent ways. This could arise at the recruitment stage, where a remote working position may be advertised at a lower salary point. Also, the frequency or the amount of pay rises may not happen to the same magnitude that employees are used to. Employers will still need to mindful of any issues around equal pay/discrimination and breach of contract/unlawful deductions which may arise. There may also be an elimination/scaling back of discretionary benefits, such as gym memberships and childcare support, or working from home is treated as part of a package of benefits where employees have the choice to select this over other valuable benefits. We could also see an increase in performance-related pay (bonuses/commission making up a greater share of overall remuneration).

What are your options?

If you are in a situation where your employer is looking to reduce your pay it is best to seek legal advice at an early stage.

  1. Know your contractual and statutory rights so you can contest any unlawful action by your employer. Seek support from other colleagues and/or a union – there is strength in numbers.
  2. A complaint can be raised either informally or formally via your employer’s grievance procedure.
  3. Be prepared to present your case to your employer on how you are still able to do the same job, with the same responsibilities, with the same quality and effectiveness whilst working from home. Do you have data points to support your case?
  4. A compromise might be found by way of a hybrid working pattern (some days in the office and some at home). You may need to be pragmatic. Think about what is important to you and whether you can agree arrangements which work for both sides.

If you’re seeking legal advice relating to pay cut please call our highly experienced Employment Law experts on 0808 252 5231 to talk through your situation with us.

The author of this blog is Xania Scarlett, a Legal Assistant in our Employment law team.