Pay cut across the board: ask the expert

I have been working for my current employer since 2002. I started as a customer service advisor and then a few years later was promoted to senior customer service advisor. I was working full time on a shift system. My salary is made up of basic hourly rate, enhancements for unsociable hours etc. I started my maternity leave in February 2010 and have just returned to work in January. I applied for flexible working with new hours to work around childcare. This has been agreed in writing. There have now been meetings at work regarding all staff  taking a pay cut to bring wages in line with industry norms. We will be losing our enhancements for unsociable hours and they won’t be paying us any additional money for bank holidays etc. Before changing my hours I was on a salary of £22k before deductions. This is a similar wage for all senior advisors. The company wants to reduce wages to £16k for the same role. Can they do this? The company has said it’s doing it to be in line with the industry standard. The union is involved. Do we have the accept the change even if it will cause hardship?

Whilst there has been a change in your terms of employment due to your flexible working request, it seems that your employer is trying to apply the reduction in salary across the entire workforce. You mention that all staff are to be affected; therefore it doesn’t seem that the reduction in pay is limited to you. As such, it would be difficult to claim sex discrimination based on your flexible working request following maternity leave.

Although you wouldn’t have a claim for sex discrimination, you have potential claims for unlawful deduction of wages or breach of contract and constructive dismissal, if your employer does go ahead with the pay reduction. This would be applicable to all affected staff.

There are three ways in which an employer can lawfully make deductions from wages. These are:

– If the deduction is required / authorised by statute, e.g. deductions for PAYE and National Insurance;
– If there is a provision within the employee’s contract allowing the deduction to be made without prior written consent;
– If the employee gives their written consent for the deduction to be made.

As point 1 is not applicable in this case, and as you’re not prepared to give your written consent, point 2 is the most important point to consider. I would advise you to look closely at your contract of employment and staff handbook for a clause stating that your employer may introduce new pay terms without the need to obtain employees’ express consent.

Even if your contract does contain such a clause, this does not necessarily mean that the employer can go ahead regardless. Although the recent case of Bateman and other v Asda Stores Ltd (February 2010) held that the employer was able to rely on such a clause to change the pay terms, this case differs substantially to yours in its facts. In this case, the change introduced was not radical and only one of the six test case employees contended that they would suffer a financial loss due to the new regime. Clearly in your case, a reduction from £22k to £16k per annum would constitute a radical change. The Court of Appeal decision in Wandsworth London Borough Council v D’Silva made it clear that whilst an employer may reserve the right to unilaterally change a particular aspect of an employment contract, if the change could produce an unreasonable result, the courts would “seek to avoid such a result”. You could certainly argue that the significant reduction in pay leading to financial hardship would constitute an unreasonable result. I would therefore advise that you would have a strong claim for unlawful deduction from wages under section 13 of the Employment Rights Act 1996 even if your contract contains such a clause.

In terms of your options going forward, I’d suggest that you discuss this advice with your union representative and with other affected employees. You should then communicate this to your employer and advise that you’re aware of your employment rights should they persist in attempting to make the reduction.

In the event that your employer goes ahead and makes the reduction, you have a number of options:-

– You (and your colleagues) could lodge a formal grievance to your employer, in respect of the deduction, making it clear that you do not agree with the same. The grievance process may result in an amicable solution.
– You could resign and bring a claim for constructive unfair dismissal. This would be on the basis that the significant reduction in pay constitutes a repudiatory breach of contract (i.e. your salary is a fundamental part of the contract which goes to its root, therefore a change in this has the effect of terminating the contract). Obviously resigning from your job is a decision that you would need to consider carefully.
– Together with your unfair dismissal claim, you could bring a claim for breach of contract and unlawful deduction from wages under s.13 ERA 1996.
– You could remain in your employment and bring a claim for breach of contract / unlawful deduction from wages only.

Whatever you decide, I would strongly advise you to act quickly once the reduction has been made. If you simply continue your employment and don’t take any action against the employer until a period of time has passed, they’ll have a strong argument to suggest that your silence constituted an implied acceptance of the new terms.

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