Flexible wages for flexible workers?


This article originally appeared in issue 20 of IT Pro 20/20, available here. To subscribe and receive each new issue in your inbox, Click here

For many, the pandemic has in fact created an exciting opportunity. The shift from work in the office to working from home – which the majority of employees believe has made them more productive – has seen many people decide to move away from expensive cities for a quieter, more affordable life in the countryside. Others have embraced the remote working revolution and credited it with helping them reduce travel (and associated expenses) as well as giving them more quality time with family and friends. Some even claim that it has helped alleviate historical gender imbalances in the workplace.

As a result, many workers are hoping that being attached to a desk is a thing of the past and that hybrid working is the way to go. However, some organizations have different ideas about what the future of work looks like.

Google, which was quick to embrace remote working last year, said staff who decide to work from home permanently after the pandemic will have their pay determined based on their location. This could see some facing a 25% cut in their pay. Other tech giants Facebook and Slack have also said they will adjust people’s salaries based on where they live, while reports suggest civil servants living in London could also see their salaries drop if they refused to return to the office.

These organizations are unlikely to be alone in their approach to remote working after the pandemic. A study by HR software provider CIPHR shows that up to two-thirds (68%) of UK companies are considering pay cuts for staff who choose to work from home, although many (53%) say they have saved money. money by having more telecommuting. workers.

Is it legal?

For employees who fear that their dream of working remotely permanently could result in a substantial loss of income, there is good news. Indeed, such a policy will probably be difficult to apply for employers.

Claire Brook, employment law partner at Aaron & Partners, says that while there are circumstances in which a reduction in pay for home or hybrid work may be warranted – for example where the pay previously included an improvement to cover a travel expectation that is no longer relevant to the role – organizations planning more drastic changes could find themselves in legal hot water.

“Reducing an employee’s salary if they wish to continue working from home is a controversial suggestion which, without prior agreement, would constitute a breach of contract and could lead to claims for: illegal deductions from wages, breach of contract and potentially, termination claims when an employee resigns in response to a fundamental breach of contract, ”she said IT pro.

“A unilateral reduction in salary (which is more than minor or insignificant) could also give rise to a violation of the implied duty of mutual trust.”

Kate Hindmarch, employment law partner at Langleys Solicitors, agrees, adding that such notional pay cuts could only be implemented by consultation and consent. For example, if an employer wants to reduce an employee’s salary, they will need to explain their business case and justify the change.

“An employee may not accept the deduction, which means an employer would have to terminate the existing contract by giving notice, and then offer to engage with lower pay. This decision could be appealed by an employee because it would effectively be a dismissal, but with the possibility of signing a new contract with a lower salary, ”explains Hindmarch.

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“Under current law, if an employer wishes to change the terms and conditions of a current employment contract, they must first seek to reach an agreement on the changes by consulting workers and unions, optionally. “

Hindmarch continues: “If an agreement cannot be reached, employers must terminate existing employee contracts by giving notice and offer to re-engage under the new conditions – ‘lay off and rehire’. Employees are then effectively made redundant and faced with the choice of accepting the new, generally less generous, conditions. “

And the morale?

Apart from the financial factor, arguing with employees over the terms of the contract could seriously damage staff morale.

“Employers should be aware that dismissal and re-employment can damage long-term employee relationships, especially if the situation is handled insensitively,” adds Hindmarch.

“Employers risk alienating their entire workforce; Recent media comments report that employees who are asked to accept a new contract on worse terms are even threatening employers with strikes at the company.

This is a view shared by Claire Williams, Director of People and Services at CIPHR, who urges companies to be very careful if they are considering removing location allowances or cutting wages based on who chooses to work. from a distance.

“[This is] not only because of legal and ethical considerations and consequences, but [also] the long-term impact on employee loyalty and the risk of increased turnover, ”she said.

“If employers have very clear policies and contractual agreements regarding location allowances, then it will be easier to navigate. But that won’t necessarily make it more palatable to the employee who learns that their earnings will go down through no fault of their own.

Research has shown that some employees who take advantage of the benefits of remote working would be willing to accept less money to continue working from home. More than a quarter (27%) of workers would accept a pay cut of between 15-20%, with a similar number (26%) willing to accept a pay cut of more than 20% for the benefit of telecommuting, according to the study of Citrix found.

While some employees may well be more than happy to trade a cut in pay for the opportunity to work from home, for those who don’t, things could get complicated, according to Sarah Edwards, senior employment law advisor. at Howarths.

“In an environment where many employees have seen their wages drop due to time off work and rising bills at home, employees may very well feel aggrieved to see their wages cut,” she said. . IT pro.

In addition, the Office of National Statistics has indicated that employees who work from home are more likely to work overtime, compared to site-based employees, which may well cause employees working remotely to work overtime. ask why a pay cut is reasonable.

“Additionally, companies where workplace flexibility comes at a price may find it difficult to nominate good candidates for positions, especially in a market where candidates are hard to find in the first place. “

Ultimately, employers are not advised to pay less for staff to work from home on an ongoing basis, even on a hybrid basis, though their role will remain the same as when they were fully office based, according to Alan Price, CEO of BrightHR. Organizations risk creating a two-tier culture where employees are paid differently for doing the same work, he warns.

“Even if the employee agrees to receive a pay cut, employers could end up with a claim of indirect sex discrimination if it can be shown that more women than men work from home, so employers should be careful. “he said.

“On a similar note, if employers give contract benefits with financial value to those working in the office that are then cut off due to working from home, they may need to think about offering compensation for that.”

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