Coronavirus – Proposing Workforce Pay Cuts

Alongside the hot topic that is furlough leave, many businesses are currently having to review their workforce to protect their business and the livelihoods of their staff.

Some employers have made small changes such as halting promotion processes and withholding annual salary increases and bonus payments for employees in an effort to save expense. Many have had to implement tougher measures such going to a four day week or workforce-wide salary cuts.

Implementing pay cuts due to the impact of the coronavirus

At a time like this, it is important to think about what is the most appropriate course of action for your business in the current climate and, realistically, implementing pay cuts amongst your workforce may be a sensible option.

A pay cut is a variation of the terms and conditions of employment and, whether on an individual or collective basis, would require employers to obtain consent from their employees.

Employers should try to get employees to agree to the proposed changes voluntarily by effectively explaining the financial position and trading conditions. Where an employer recognises a Trade Union, they should be involved in these discussions.

Employees’ consent can be given orally or in writing, however, we would recommend obtaining written consent. Although a reduction in remuneration would be inevitably disadvantageous and disappointing to an employee, it is hoped that most employees would understand the times that we are in and appreciate the need for employers to act.

If employees are unwilling accept pay cuts then an employer can take steps to either insist on the changes or to consider alternatives such as furlough or redundancy.  Forced pay cuts and redundancies will likely trigger collective consultation requirements and minimum consultation periods if more than 20 employees are involved.

How can Nelsons help?

Shivani Pandya is a Solicitor in our Employment Law team.

For further information in relation to implementing pay cuts due to the impact of the coronavirus or any related subjects, please contact Shivani or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.

 

Statement concerning Coronavirus. Read more
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Statement concerning Coronavirus. Read more
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