Coronavirus and cutting pay
Can my employer simply cut my pay or hours of work due to the corona virus outbreak?
An employer is generally not entitled to unilaterally impose on an employee a pay cut or reduced hours without your consent.
The only exception is where your contract of employment reserves the right to vary your pay and hours, however even then any such variation would need to be reasonable and for solid business reasons. Any decisions taken by businesses from the fallout from the coronavirus is likely to be considered “reasonable” if your employer is invoking a variation clause in your contract. Your employer should proceed with caution, however, as there are no guarantees that the courts will consider this reasonable conduct.
If your employer does decide to reduce your salary and hours without your consent or the right reserved in your employment contract, you have the following options:
- resign and pursue a claim for constructive dismissal; or
- continue to work under protest (which you should set out in writing) and consider making a claim for the loss you have suffered; or
- accept the reduction, because some work and income is better than nothing in these very uncertain times.
You need to be employed for 2 years to qualify in making a claim for unfair dismissal.
If you do agree a reduction, it should clearly be stated that it is temporary in nature, otherwise you could be deemed to have accepted a permanent change.
What steps is my employer likely to take if I do if I reject a cut in my pay or hours?
Your employer may back down, although this could be unlikely in the present climate, and if they are under financial pressure.
If your employer is feeling bullish, they could simply terminate your employment and take their chances with an subsequent employment tribunal claim. They would be citing “some other substantial reason” which is one of the fair reasons for dismissal- assuming they can prove their case. You would be entitled to make a claim for unfair dismissal if you qualify.
An alternative approach would be for your employer to terminate your employment contract by serving you with contractual notice, then immediately offer you a new contract on a lower salary. You would again then be able to bring a claim for unfair dismissal, even if you have accepted the new contract.
The results of a claim for unfair dismissal will depend upon:
- whether an employer can establish a substantial business reason for the pay reduction;
- whether the disadvantages the employee would suffer as a result of the changes were properly considered, and whether these outweighed the advantages to the employer of implementing the changes;
- whether the employer had engaged in meaningful consultation about the salary cut;
- whether a majority of the employees accepted the changes;
- whether there has been genuine consultation with affected employees and/or their union representatives and/or employee representatives;
- whether the employer acted reasonably when responding to employee objections
If your employer decides to pursue this course of action in the current climate of the coronavirus pandemic, their course of action is likely to be considered justified. And remember (as stated above) that you need 2 years service before you can bring a claim for unfair dismissal.
Could I not argue that my position is really redundant, and I should be entitled to redundancy pay?
Yes, you could and your employer may agree to this. However, it is difficult to force your employer to accept that there is a redundancy when they do not see it the same way. In any event, the test of redundancy would need to be met (namely that your role is no longer required). Your employer, on the other hand, could be taking the stance that your role is still required, but your present salary is not affordable. There is more likely to be a redundant situation where your hours are being reduced, and whether or not there was a flexibility clause in your contract of employment allowing for a variation will be relevant here.
Can I take advantage of the Furlough Scheme (the government’s coronavirus retention scheme?
In all cases, and in the present climate, a sensible dialogue should be entered into with your employer. Hopefully, their approach will be sympathetic. If you cannot resolve the matter informally, you can always lodge a formal grievance with your employer. Usually your line manger or HR would call a meeting to discuss your grievance, however in the present climate this is more likely to be dealt with in writing or in real-time online by video conferencing. You can otherwise seek external help and support.