Can Your Manager Legally Reduce Your Salary?

In the current economic climate, having to downsize businesses and reducing salary’s are becoming common solutions to struggling businesses around the world. This will usually be communicated to the employees with the explanation that this has come as the result of a choice between making redundancies in certain departments or cutting salaries across the board.

Receiving a pay cuts of 10% – 20% is most commonplace, some for a limited time only (usually around the six month mark) and with a worst case scenario, having no time limit at all.

As per UK employment legislation, employers cannot reduce an individual employee’s salary; the cuts must apply to all personnel in equal percentage, however there are exceptions to this rule. In this type of scenario, employees need to know their rights and be aware of the repercussions for termination of employment payment or anything that may affect pension payment. It can be a good idea to get together with your colleagues and negotiate collectively, or with your local employment tribunal that can give you free subjective advice. In the UK, employees cannot be forced to accept a pay cut, so there is the option to reject such an offer even if the colleagues in your department accept.

Many organisations will be turning to the idea of pay cuts, especially if they have been recently incorporated, as an alternative to issuing severance packages. Alternatives such as unpaid leave or career breaks are being offered. Remember, employers have spent a lot in training and don’t want to lose their investment; they will try everything within their power to avoid losing you as an employee, so from this standpoint you have an advantage here.

What questions you should ask your employer if you have been asked to take a pay cut:

  • How long will it be for?
  • Will it have any impact will it have on the benefits I receive?
  • What impact could it have on my existing or future mortgage?
  • Can I look for other work to fill the gap in my income?
  • How will my pension be affected?