Remote worker pay cuts: the risks employers should know about

  • Pay & Benefits
Kate Palmer FCIPD - Director of HR Advice and Consultancy at global employment law consultancy, Peninsula.

Kate Palmer, HR Advice and Consultancy Director

(Last updated )

Recently, one law firm slashed remote workers’ wages by 20%.

You might be asking yourself whether a pay cut would be reasonable if staff will no longer be travelling into work. It could be a good way to help you recoup expensive overhead costs if you’re paying for a workplace they aren’t using.

The question is: can you lawfully reduce a remote worker’s wages? The answer is you might – but be aware of these risks…

1. It may breach the contract

To see if you can cut your remote worker’s pay, you’ll need to check their contract. You might currently offer your workers an enhanced rate of pay. This could be because your staff work in a certain area that’s more expensive to live and work in (e.g. London).

So, if your staff start working from home permanently, you might be able to withdraw this if they’re no longer working in that area.

But in most cases, a pay cut is likely to be breaching your worker’s contract. To change your remote worker’s pay, you would need to consult your staff and they would need to agree to the deduction in writing. If you try to cut your worker’s pay without their permission, you’re at risk of facing lost wages and constructive dismissal claims.

2. It might damage staff relations

Even if staff agree to a pay cut, you still risk damaging your working relationship.

Staff might feel forced to come back to work to avoid a pay cut and this could breed feelings of resentment. They might feel you’re not hearing or respecting their needs and preferences.

Plus, you might end up segregating your remote workers from the rest of the team. They might end up feeling less valued than the workers who go in. This is likely to create a divide at work that might seriously lower morale. As a result, they might start looking elsewhere for a higher-paying job that’s fully remote.

3. You might face grievances or legal claims

Your staff might go one step further than simply harbouring resentment. They might actively challenge you. Your workers might argue that a pay cut is unnecessary, especially if:

  • they feel they work to the same standard at home 
  • you can’t justify why this saves the business money

Some workers might prefer to work from home because they have caring responsibilities. If they have no choice but to work from home, a pay cut might give staff strong grounds to make a discrimination claim.

For instance, if a lot of remote workers are women looking after children, this could lead to indirect sex discrimination claims. So, you would need to be able to justify your reasons for cutting pay or you may put your company at legal, reputational, and financial risk.

4. You might lose staff

Regardless of whether your staff agree to the pay cut or not, you still need to give them their notice period on their current contract. Explain to them that you’ll continue to pay them at the full rate until the notice is up. After that, you’ll pay them a reduced rate.

At this point, you’re leaving staff with a choice – agree to an amended contract or leave the role.

So, be prepared that they might choose the latter option.

Need HR advice?

If you’re considering pay cuts, it’s important you tread carefully and follow employment law guidance – or risk bad morale, contract breaches, and costly claims. Your HR advisers will help you navigate through the terms of your staff contracts, outline your options, and protect you from legal risk.

Go one step further with on-site HR support. As part of Peninsula’s Face2Face service, HR consultants will visit your workplace and handle those tough conversations for you. So, you don’t have to get involved.

But if you want to take the reigns, they can walk you through the process. Either way, you avoid the risk of impartiality, legal trouble, and error.

And if you’re not yet a Peninsula client, get a quote to start accessing unlimited HR support.

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