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The legal implications of cutting pay for remote workers

By Mark O’Donnell, employment law adviser at WorkNest.

A narrated version of this blog is available at the bottom of the page

WorkNest’s Mind the Gap research has revealed that just 54% of employers are confident that remote workers and office-based employees will be treated evenly and fairly in respect to pay and reward in the next 12 months. Confidence amongst employees is even lower, at 40%. So, what are the legal implications involved in cutting pay for remote workers? And what other relevant HR issues must employers consider?

The contract

This governs the working relationship and invariably includes an obligation on the employer’s part to pay their employee at a certain level. The contract can be changed with agreement by both sides, and it is therefore possible that an employee might consent to have their salary reduced to secure a permanent homeworking position.

However, this approach might present certain practical problems. For example, unanimous agreement among all affected staff is desirable to ensure a consistent approach is adopted, but an employer will be less likely to achieve this if a larger quantity of staff members is involved.

This approach might also be perceived as unfair by the employee, and if a deal is struck, then it might only be done reluctantly, which may have adverse consequences for staff retention, morale, and productivity.

No reduction in pay should see the employee’s salary fall below the National Minimum/Living Wage.

Unilateral changes

An employer can unilaterally change the contracts of staff with more than two years’ service in certain limited circumstances and usually only when an urgent business need forces its hand. This process most commonly involves the employer giving notice to end the employee’s contract and then offering re-engagement on new terms – which would be reduced pay in this case.

A compelling business case detailing why cutting pay was absolutely necessary, and why no alternative options could be implemented, would be needed to justify altering the contracts of remote working staff, and that may be a difficult task for the employer to successfully achieve. Employers should discuss their circumstances with an HR professional to establish if a legal basis for this action can be found.

If a contract is ended in order for a new one to be issued, then an employee with more than two years’ service can claim unfair dismissal on the original contract irrespective of whether or not they accept the new terms. They can also resign and claim constructive dismissal, so this action might result in the loss of the employee and the creation of a Tribunal claim.

NB: Collective consultation rules should also apply if 20 or more staff are involved in a forced change of contract process.

The two-year threshold is relevant because employees must attain that level of service before they are able to claim unfair dismissal in the event their contract is ended by the employer. So, an employer can change the contracts of those employees with less than two years’ service without creating the risk of an unfair dismissal claim being made (however, this isn’t the only risk – see below regarding discrimination).

Similarly, an employer might also adopt a policy whereby the pay of its current staff is retained but all new recruits that work from home are engaged on a reduced salary. Both ideas should consider the further potential legal implications covered in this article.

Discrimination

If a policy is adopted that disproportionately affects staff who share a protected characteristic, or a single employee concluded that their protected characteristic was a relevant factor in the implementation of the policy, then this may give rise to discrimination claims being made.

For example, if it so happens that all an employer’s homeworkers are women, then paying them less would have the effect of widening the gender pay gap. This might engender complaints, as well as equal pay and discrimination claims. It also looks bad for an employer and might create a reputational issue.

Any employer that contemplates cutting the pay of remote workers should undertake a careful analysis of how this action might impact certain staff members and if they risk creating a discrimination concern. Again, unlike unfair dismissal, claims of discrimination, equal pay and breach of contract can be made by employees with less than two years’ service.

Morale

The reality is that the primary motivation of most employees who work is to earn a wage and any action that has the effect of reducing their earning capability will most likely not be well received.

Staff might reluctantly come into work because that represents the best economic option for them, and their performance and attitude may be affected because they consider they are not operating in an optimum working environment because of an unfair policy.

A perception might arise that homeworkers are regarded by the employer as the lesser group in a two-tiered structure because they are paid less than their site-based colleagues. This creates a risk of a resentful attitude being fostered; if that should happen, it may create disruptive problems.

Conclusion

A full analysis of the benefits of homeworking should also be considered. For example, it would be reasonable to expect the majority of homeworkers to maintain a near-perfect timekeeping record. There may also be a reduction in overheads or travel expenses being claimed.

Hybrid working might represent an appealing compromise solution for both parties without the need for a cut in pay.

If, however, an employer has judged that cutting the pay of its staff is necessary, then it must consider how their decision relates to the contracts that staff currently have and whether there are discrimination concerns. As this article indicates throughout, an employer’s situation should be fully reviewed with reference to the points identified above before any substantive action is taken.

WorkNest has produced webinars on this subject and other issues of unfair treatment in the world of hybrid work, check the website to watch.

Narrated by a member of the ACEVO staff

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