IS IT LEGAL TO REDUCE
EMPLOYEES’ SALARIES?
It was revealed by the BBC that pay gaps were present
among the BBC’s male and female employees and
that following this reveal, six male employees agreed to
receive a wage cut of up to 30 per cent from their annual
salaries to balance the pay. Radio Four’s presenter
John Humphreys stated this move was a reasonable
request in light of the corporation’s reduced budgets.
However, this is not a move which is usually undertaken
by employers.
Legally, an employer doesn’t have the right and cannot
impose pay cuts upon its employees without risking a
claim. If the contract of employment sets out the details
of salary entitlement or even if it doesn’t and pay has
been made at a set rate for some time (in which case
“custom and practice” may apply), then agreement and
consultation is the best bet.
The BBC appears to have approached this by seeking
employees consent and agreement to salary reductions.
There is no obligation on the employee to give consent
and the employee also retains the right to seek legal
advice and take action to prevent such a change taking
place. If an employer wishes to reduce an employee’s
salary without their consent, the employee could be
entitled to:
• resign and pursue a claim for constructive unfair
dismissal; or
• continue to work and sue for compensation for the loss
they have suffered under a Breach of Contract Claim.
The employer could choose to terminate the employee’s
contract of employment by serving them with contractual
notice and then offering a new contract on a lower salary.
Should the employer decide to pursue this course of
action, as long as the pay cut is justified and there is
a valid business rationale and the process is legally
compliant this will help to avoid costly tribunal claims.
However, do be aware that employees whose contracts
are terminated, can bring claims for unfair dismissal, even
if they have accepted the new contract. Consultation will
be required if a number of employees are affected by
proposals like these and an employer is legally obliged
to consult. This may be with a trade union or employee
representatives. Failing to do so could result in hefty
compensation claims.
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Results of a claim for unfair dismissal will depend upon:
• whether the employer can establish a substantial
business reason for the pay reduction;
• whether the employee would suffer disadvantages as
a result of the changes and whether these outweighed
the advantages to the employer of implementing the
changes;
• whether the employer had chosen to engage in full
consultation about the salary cut;
• whether a majority of the employees accepted the
changes; and
• whether the employer had acted reasonably when
responding to employee objections.
The BBC case is rather unique. Partly funded by its
licence payers (to whom it is accountable), it is very
open to public scrutiny. It has a high profile with many of
its presenters approaching or having reached celebrity
status having become household names. Therefore,
should the male presenters not have agreed to the
reduced salary, the courts of public opinion may not
have been so favourable towards those not agreeing to
pay reductions and media type consequences would
have been a distinct possibility.
The issue of equality and fairness in the workplace has
become priority, companies are being judged on how
they conduct themselves. The UK is one of the first
countries in the world to put into place gender pay
reporting legislation. The legislation applies to companies
with 250 or more employees, requiring these companies
to publish statutory calculations illustrating any pay gap
between male and female employees. It is a new era of
transparency that many have welcomed.
One may argue that a logical answer to closing the
gender pay gap would be to increase the wages of
female workers rather than to reduce the wages of
their male counterparts. However, as the BBC may well
argue having paid high wages to big names, this wasn’t
a financially viable option.
If you require more information on terms and conditions
of employment, please do not hesitate to contact
ELCONS Employment Law Consultants on 01422 822
842