Google. Microsoft. Facebook. The Civil Service. Along with 68% of UK employers surveyed by CIPHR, these are just some of the organisations seriously considering reducing the pay of employees who work either permanently from home or under a hybrid working pattern.
This is despite the fact that 97% of the same respondents indicated staff would be allowed to work from home at least part of the time moving forward.
The justification makes sense on the face of it. The ability to work from anywhere rather than out of large town or inner-city locations may well lead to a lower of cost of living.
Homeworking could be framed as a desirable benefit having a financial value and therefore mean a lower salary is justified in return.
Chris Dobbs discusses the legal implications of lowering the pay of employees working from home.
What legal implications does cutting salaries for homeworkers have?
However, employers should think carefully about the legal and morale implications of making these kind of decisions.
It is, of course, very easy to point out that those working from home benefit from lower travel costs, increased flexibility and more time at home among other things but do these actually add up to justifying lower salaries especially when the costs to the employer may have gone down?
Can an employer reduce your salary?
The rate of pay is generally considered a fundamental term of the employment contract. It is unlikely that an employer will have lawful grounds for reducing pay without consulting with the employee affected first.
There may be a contractual provision allowing it but these are incredibly rare and usually spotted by employees before the contract is signed.
Where more than 20 employees are affected by a proposed pay cut arising from the same circumstances, there is a legal obligation on the employer to consult much like a redundancy situation.
Can my employer reduce my salary without consultation?
Any change which is not agreed runs the risk of claims by the employee including for breach of contract, constructive dismissal and unlawful deductions claims. Failing to consult in mass situations also carries a protective award of 90 days’ pay.
A reduction which does not arise from an associated reduction in productivity or value to the business is always going to look arbitrary.
Is it illegal to pay two employees doing the same job differently?
There is, in principle, nothing wrong with paying two people different amounts to do the same job. This is a matter for negotiation and contract between the employee and the employer.
However, this can become a problem either when staff find out about the difference and begin to question it or when there is an apparent case for discrimination.
What potential issues might arise from paying homeworkers less?
Employee Morale
Salaries are paid to compensate individuals for the time they give to their employer and on the basis of value they provide to the employer with that time.
Paying those working from home less than those in the office for doing ultimately the same job runs the serious risk of creating a culture where working from home is seen as having less value to the business.
Anecdotally, this is far from the case with businesses reporting increased productivity where working from home has been implemented effectively.
Employees whose pay is forcibly cut, or those who discover through the grapevine they earn less than office-based colleagues, are going to very quickly suffer from a lack of motivation.
At a time when the ONS is reporting economic recovery, with high numbers of vacancies and a spike in wages, employers need to consider whether handing staff a reason to consider leaving is a sensible move.
The discrimination risks of paying homeworkers less
If we assume that a business does impose a lower rate of pay on homeworkers than its office-based staff, there are a number of potential situations which may give rise to discrimination claims:
- Working from home may help disabled employees have access to new and different opportunities. Financially penalising these employees may amount to an unlawful detriment and give rise to discrimination claims.
- Women, according to a recent Employment Appeal Tribunal decision, can be assumed to be affected by the ‘childcare disparity’ and are therefore more likely to take advantage of working from home where it is available. This presents a risk not only of the normal discrimination claims but also equal pay claims and, for larger companies, increased disparity in gender pay gap reporting.
Can employees claim unequal pay?
A pay reduction will always look punitive and it will be easy for an employee to show that the pay reduction could amount to a detriment.
These are unlikely to be direct discrimination claims as the home v on site location may well be a distinction enough to show that the different treatment was not solely due to the protected characteristic.
That said, the difference in treatment would still have to be objectively justified and, in the case of potential disability claims, this may also give rise to a section 15 claim.
If an individual claims they are being paid less because of something arising from their disability and the objective justification defence is likely to be harder to satisfy.
Flexible Working
It is also easy to forget that within the current talk of agreed hybrid working models and contract amendment by agreement, statutory flexible working requests still exist.
Employers should be mindful that changes to any working arrangement made in accordance with the rules can amount to a statutory request and that unreasonable denial of such a request can amount to cause for a constructive dismissal or be a discriminatory decision in its own right.
A specialist employment solicitor’s view
Employment Solicitor Chris Dobbs says: “Pay cuts are never a good thing. Even when agreed they run the risk of damaging morale and employee confidence in a business.
Again, attempts to pay staff differently based on anything other than value to the business or role runs the risk of creating a ‘two-tier’ feel within a business. The costs of addressing this may prove to be more than what is saved in changing pay structures.”
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