Can businesses legally cut pay for remote workers

Can businesses legally cut pay for remote workers?

Working from home was relatively rare until the COVID-19 pandemic. However, this is likely to change, with an expected increase in the number of hybrid workers, who spend part of their time working from an office and part of their time working from home.

Many employers have stated that they do not expect their employees to go back to the workplace on a full-time basis and that hybrid working or even full remote working will become the ‘new normal’. But how does this affect employees’ pay and benefits? Can employers cut pay for remote workers?

Pay cuts for remote workers

The subject of cutting pay for remote workers has become a hot topic of discussion in the news. Google announced in August they may cut pay for US employees who opt to work from home permanently, using a pay calculator to show their employees the pay effects of working remotely.

Google has not announced plans to do this in the UK, but nonetheless their plan in the US has inspired debate here as well as over the pond. Plus, a study by CIPHR found that over two-thirds of British businesses (of 150 polled) are contemplating pay cuts for staff who opt to work from home.

The legal implications of cutting pay

remote-workers-cutting-pay

But what are the legal implications of pay cuts for remote employees? Here are some observations on what UK employers should be looking out for when it comes to cutting pay.

Salary

Employers should take care that the salary and benefits package provided to those working from home is not less favourable than that provided to comparable employees. If they are treated less favourably, a homeworker or hybrid worker may have a claim for discrimination.

Employers should be cautious about making detrimental changes to an employee's salary, which will most likely amount to a change to terms and conditions of employment. A failure by the employer to pay an agreed rate of salary or provide other financial benefits to the employee's detriment is likely to be a repudiatory breach of contract.

However, a change in salary may be something the employee is willing to consent to in exchange for the employer's agreement to a requested homeworking arrangement. Employers should also consider the discrimination risks if it requires employees to take pay cuts as a condition of a homeworking or hybrid working arrangement.

Benefits

An employer should also ensure that those working from home have access to any benefits or facilities that they would have if they worked from the office e.g. canteen, gym etc. An employer is probably not expected to compensate for on-site facilities (such as a gym), provided that the homeworker has access to them. If they are unable to access them, then the employer should consider compensation or provide an alternative arrangement.

Learn more: Which benefits and perks do employees want most in 2021?

Holiday and sick pay

Additionally, homeworkers and hybrid workers should have the same amount of holiday as comparable workplace-based workers and the same entitlement to sick pay.

Ensure you are calculating holiday entitlements consistently and fairly with a holiday management system in place.
holiday management software

Discrimination

Employers with homeworkers or hybrid workers will need to be aware of the risks of discrimination claims that may arise.

There is a risk of indirect discrimination, as an employer's approach to homeworking and hybrid working is likely to amount to a provision, criterion or practice that puts individuals with a protected characteristic at a particular disadvantage compared with others who do not share that protected characteristic. Employers will need to ensure that their approach is justifiable as a proportionate means of achieving a legitimate aim.

Making changes to remote worker's terms and conditions

Making changes to remote worker's terms and conditions

If an employer does wish to reduce a remote worker’s pay, there are three options:

  • To seek agreement to the changes and dismiss those employees who refuse to agree. The employees who are dismissed may have claims for unfair dismissal and/or breach of contract.
  • To terminate the existing employment contracts and offer re-engagement on the new terms. The employees may have claims for unfair dismissal and/or breach of contract, but the offer of re-engagement may mitigate their loss. In addition, there may be collective consultation obligations.
  • To impose the changes and leave it to the employees to decide how to respond. This may result in claims of constructive dismissal and/or breach of contract.

Therefore, if an employee does not agree to a reduction in pay (which is probably quite likely) then the options the employer must continue with the proposed changes are quite extreme and could result in a dispute that might lead to a court or Tribunal claim. In summary, cutting pay for remote workers is a potentially risky strategy for employers that would need to be navigated carefully.

Read more from our blog

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Wrongful dismissal: how is it different from unfair dismissal?

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Written by Matthew Ainscough

Matthew Ainscough is a Senior Employment Lawyer and Fellow of the Chartered Institute of Legal Executives (FCILEx), specialising in discrimination and employment litigation for law firm Bell & Buxton incorporating Ironmonger Curtis. He writes about specialist employment law topics and issues.

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