Work has been ticking along just so, your salary is good and the bills are covered with enough left for some spending money. But if you’ve just discovered your employer has plans to reduce your salary, you’ll be understandably concerned.
There are times when it can be legal for an employer to reduce pay, but in most cases this needs to be done with your agreement.
Our guide will show you how to navigate proposed salary reductions, and outline your rights under UK employment law.
Can an Employer Legally Reduce Your Pay Without Your Consent?
In most scenarios, employers can’t legally reduce your pay without mutual agreement. Should an employer force these types of changes to employment terms and conditions, they may have breached your contract of employment.
However, there are some scenarios where an employer could reduce wages without explicit consent from you. Here are some examples of legal reasons to reduce employees’ wages.
Mutual Agreement
When a pay cut is proposed, employers must have the consent of all staff concerned. When staff mutually agree to a pay cut, the move becomes legal for the employer.
Most UK workers have a contract of employment they can refer to when they are unsure of any upcoming changes. A contract cannot be changed without informing the staff and seeking their agreement.
Making changes and failing to get agreement is likely to mean there has been a breach of contract.
Contract Variation Clauses
Sometimes, an employer might add a variation clause into employee contracts. This type of clause gives employers the right to make changes, but usually only under specific circumstances.
For example, an employer might insert a clause which gives them the right to reduce employee wages during financial difficulties.
However, even where a variation clause exists, you still have legal protections. Your employer must follow a fair process when enforcing a variation clause, and your statutory employment rights remain unchanged. For example, the right to be paid minimum wage and protection against maternity discrimination.
If you have been told your contract has a variation clause and you feel it’s unfair, consider contacting ACAS for advice.
How Might Pay Reductions be Implemented?
When we think of a pay reduction, we assume it will involve a drop in salary. However, a pay cut it does not always look like this.
Employers may take actions similar to the following, thereby effectively reducing wages for their staff:-
- Overtime rules might change. Employers do not legally have to pay for overtime at all. They may decide to take this route or may withdraw the option to work overtime altogether.
- Reduction of removal of bonuses. There might be a change to the way bonuses are paid out or removed altogether.
- Changes to company sick pay. Enhanced sick leave entitlements might be changed, eg. reducing it to SSP only.
- Holiday Entitlements. Changes might be implemented to allocated holidays, reducing them to the statutory minimum.
- Reducing working hours. This indirectly leads to a reduction in wages as workers will not be paid for the same hours as before.
- Overtime Pay. Salaried employees may have their hours increased with no extra pay, or overtime payments may be reduced or stopped.
These types of pay cuts are sometimes less obvious but will still affect the worker’s salary.
Why Might Salary Reductions be Proposed?
Employers will rarely attempt to reduce pay rates without there being a problem they’re trying to solve. If a salary reduction is being proposed, there is generally a good reason for this.
Often businesses fall into a tricky period where financial problems might occur. This could be due to a fall in sales, companies being reduced in size or a need to alter business structure in other ways.
Company Financial Difficulties
A common reason for an employer to ask their staff to take a pay cut is if the business is under financial strain. It might become necessary for the management to reduce overheads as much as possible.
This is considered a valid reason for salary reductions as long as the correct protocols are adopted. This means giving notice and having the changes agreed to and signed by all the affected employees.
Employers should always discuss such changes with the trade unions first, otherwise, they may find themselves in a compensation claim nightmare.
Change in Job Responsibilities
A reduction in wages may come as a result of a change in job responsibilities. It is quite common for employees’ job descriptions to change over time.
If an employer will be giving less responsibility to a member of staff, then it is logical that pay will reflect this. It might be that, after a performance review, an employer has decided to reduce the workload of an individual.
This could follow a probationary period or a concerns about performance.
What Can an Employee Do if a Company Wants to Reduce Their Pay?
If you are faced with contractual changes in the form of reduced pay, and you don’t wish to accept them, it’s important to understand your legal rights.
A lowered income can affect all aspects of the worker’s life, including things such as benefits and tax credit payments.
You do not have to agree to these changes, but it’s vital to understand the ways you can properly register your objection to preserve your legal rights.
Working Under Protest
Employees can work under the new pay structure but do so while working under protest. This means you will work under the new terms but you do not agree to them and wish to find a resolution.
If you continue to work without formally objecting, you may be considered to have accepted the new ter,s by defauly. Therefore, if you are against the proposed changes you must be vocal about this.
Working under protest means telling a member of management this is what you are doing. This should then be followed up with a formal letter, headed Working Under Protest. You should also restate your objection on a regular basis, for example after each pay day whilst you attempt to reach a resolution.
Negotiating an Agreement
As an employee, you might consider setting up a meeting with your manager to negotiate a compromise to the situation.
You might be able to come to some sort of agreement about the proposed reduction in wages. Maybe you could ask that it is reviewed monthly and that you are kept informed.
You could agree to this change in the short term but make it clear you do not accept this as a permanent change. This means you are effectively working under protest.
If Your Contract is Terminated
Sometimes an agreement between staff and the employer just cannot be reached. There is no room for negotiations of any sort.
When this is the case, employers may take steps to terminate the contract. Employers sometimes use this route when they wish to fire and rehire under the new payment structure. When this happens, there are some options available to the employee.
Employers must follow a strict procedure for terminating a contract of employment. This includes giving the required notice and putting things into writing. The reason must be sound, with no discriminatory influences.
Resign & Claim Unfair Dismissal
You might have a strong case for claiming constructive dismissal or unfair dismissal where you have had no choice but to resign. Some factors need to be present for this claim to be taken seriously though.
The employee would need to be able to prove that there was something illegal about the new contract changes. Then explain how this led them to no choice but to resign.
This could be one of the following scenarios:-
- You were discriminated against.
- There was no good business reason for this salary reduction.
- The employer failed to hear the employee’s concerns and dismissed these as unimportant.
- Management instigated this change without first consulting with staff and giving the required notice.
- A breach of contract has occurred.
- Not all the staff agreed to the changes but it went ahead anyway.
- You were working under protest but nothing changed.
Claiming Unlawful Deduction of Wages
Employees also have the option to claim for unlawful deduction of wages in response to a forced through pay cut.
The Employment Rights Act of 1996 is there to protect employees from employers making unlawful deductions.
Employees wishing to pursue a claim of unlawful deduction of wages should do so using an employment tribunal. This claim needs to be made formally within 3 months of the incident. If an employee is successful, the employer will need to pay what is owed plus possible compensation for financial loss.
Considering Your Options
Hopefully, your options are clearer now and you can see where you stand legally with a reduction in your wages. How you respond to such a change in the contract will depend on your set of circumstances.
If there is a variation clause in the contract that you overlooked then you might need to take it on the chin. Do, however, ensure your boss is giving you the required notice and has made intentions clear. The amount offered should not result in the employee working for less than the minimum or living wage.
Should you disagree with the proposed changes, you should seek some legal advice. You want to take the right steps when showing your disapproval. You need to remain professional at all times – there might come a time when you need a reference from this employer.
Finally, always read a contract thoroughly before agreeing to it. If you are not comfortable with legal jargon, take it home and have someone look over it. Never be rushed into signing a contract without understanding the implications of a variation clause.
FAQs
Your employer can change your contract. This is simpler to do if there is a variation clause already there as this allows for changes to be made. Otherwise, there needs to be a sound business reason for bringing about this change.
An employer cannot change your job role without your consent as this forms part of your contract. Should you not consent, you can work under protest until the matter is resolved. However, you should remain vocal about the lack of consent to avoid any misunderstandings.
Hi I am a union rep and some of my members had been given higher grades and allowances for responsibility’s,after removing these responsibilities they still keep the grades for well over 10 years plus.Now a new HR department have come in and want to deduct these payments after all this time -can they after so long?