My employer wants to cut my pay – can they do that and what are my rights?

As Covid-19 continues to impact on the UK and the wider economy, many businesses are looking at not just the immediate impact and utilising the furlough scheme as one of a range of options, but also considering what action they need to take in order to survive.

Staffing costs are one of the highest costs of any business and so business owners will be considering what actions they can take to ensure they retain skills and experience for the future, whilst managing their overheads.

Some businesses may be in this situation and now considering a range of alternatives to moving immediately to redundancies. One of these options could be to implement pay cuts for some or all of their staff.

You may therefore be asked, now or in the future, to consider taking a cut in pay – so what do you need to know?

Can my employer implement a pay cut for some, or all, of their staff?

The simple answer is yes.

Pay is a contractual benefit and will no doubt be detailed in your contract of employment. So, if your employer wishes to change your rate of pay, they must consult with you and seek your agreement before implementing it.

It is important that any change to pay is confirmed in writing and that agreement is reached.

How will my employer consult with me?

This will depend on the number of staff affected by the proposed changes.

If 20 or more staff are affected your employer must conduct collective consultation. The minimum timescales for the consultation period are 30 days where 20 – 99 individuals are affected, and 45 days if more than 99 individuals are affected.

If fewer than 20 individuals are affected then your employer will still need to consult with you on a one-to-one basis for a reasonable period in the current circumstances.

What is collective consultation?

Collective consultation is where your employer will need to inform and consult with workplace representatives where 20 or more individuals are affected by their proposals.

A workplace representative can either be a trade union (if your employer recognises one or more on a day-to-day basis) or a group of representatives elected by their peers.

So, if your employer does not recognise a trade union they will seek representatives from across the affected groups. You will be able to nominate and elect your work colleagues to be your representative(s).

If I am elected to be a workplace representative what does this entail?

As a workplace representative, you will need to attend meetings with your employer to hear about the proposals and gather information in order to pass on to your colleagues. You will be able to ask questions on your own, or colleagues’, behalf.

Before, or following, each meeting it is important to obtain your colleagues’ thoughts, questions and feedback so that you can fully participate in the meetings.

It is important that you remain unbiased and provide a balanced view point.

Can I propose different options for my employer to consider?

Yes. It is important that your employer gives you the chance to listen to their proposals and to offer alternatives for their consideration. However, your employer does not have to agree to the alternatives you put forward if they do not deliver the financial goals your employer needs to achieve.

What can I do if my employer does not consult with me on the proposed changes?

If your employer does not consult collectively (where it needs to) seriously or for long enough, you may be able to make a claim for a “protective award”, which at best might be worth three months’ gross pay for you and all your affected colleagues.

As well as that, you must not be given notice of termination until any collective consultation process has come to an end.

Can I refuse to accept the pay cut?

Yes, you can refuse to accept the pay cut. But, if you cannot find and agree an alternative solution with your employer, they can impose the changes. This will be on the basis that in most cases, it is unlikely to be commercially viable for the employer to abandon or delay the change.

In order to impose the changes, your employer will need to dismiss you in accordance with your contractual or statutory notice period (whichever is the greater) and immediately offer you continued employment on the new contractual terms.

During the notice period you should carefully consider the new terms and continue to speak to your employer in order to try to reach agreement.

Can I still report for work after my notice period has expired if I refuse to accept the new terms?

If your old contract is terminated on proper notice, and you continue to work, it will be taken that you have agreed, simply by continuing to come to work, to the new terms.

Can I make an unfair dismissal claim?

Yes, if you have two years’ service, you can make a claim for unfair dismissal as your employer has terminated your contract in order to make a change to your terms. By terminating your contract, your employer is treated as having dismissed you (even if you carry on working).

In making your claim you would need to show that the reasons for implementing the changes were insufficient, that your employer failed to consider any alternatives before moving to implementing the changes and/or they failed to undertake a full consultation before you were dismissed.

What other things could be affected if my pay is cut?

You will possibly have other benefits which are linked to your pay rate, such as access to medical health schemes, death in service, and employer pension contribution levels.

During the consultation process, ask your employer for an impact statement which shows how your total reward package is affected, so that you can fully understand the impact before voluntarily accepting the proposals.