Pay Cut

Lynn S

My employer has asked all employees to take a 5% pay cut from 1st Jan. Over 90% have agreed, I haven't. I've been asked to reconsider and told that one of the options my employer has is to terminate my employment and immediately re-employ me for 5% less pay. He states that as so many employees have agreed, he can do this for financial need reasons. He has also told me that the employer has won all tribunals taken because of this. Before I seek legal advice, has anyone had an experience of this or any advice for me

Thanks

Lynn

Rachel

Not the same but at my husbands work they realised that there had been a long standing error where people were paid too much, they consulted solititors and they said as long as they were informed and got staff to sign they were allowed to do it, they had a few people that took a while to sign but yes the only other option was to terminate and re-employ.

Speak to CAB, what is employment like in your area, if difficult is it worth losing your job over? I know 5% is bad but 100% would be worse. Sometimes employers say it is only for 6 months has anything like that been said?

Sorry you are put in this situation. I hope you can work things out.

Rachel

*Jo

Telephone acas, they are a government agency who can give basis advice on employment issues.

Hope it works out for you.

Regards

Jo

oakley

I have lots of experience of this as we have made a lot of redundancies over the last few years. To save jobs at the start of the recession at the end of 2008 we were asked to take a 15% on earnings up to £40k and 20% thereafter. The take up was 90%+ with most of the remainder agreeing after further consultation, some on a slightly reduced rate.

This was for an initial period of 3 months, eventually it was for 12 months, then everyone went back on full pay. The first 3 months also included a 15% reduction in hours so the hourly rate was the same, the second 6 months was full time at reduced pay, the last three months was full time at reduced pay and holiday accrued for use in future years.

If you do not sign up it is not legal for them to withhold payment, bear in mind what this may mean in the future as they are under no obligation to increase salaries etc etc.

We also looked to place some of our employees at local factories with us funding up to 20% of the employee costs, at least we recovered 80% of the cost.

Regarding termination I would say it is not legal to terminate and immediately re-employ. You terminate employees primarily on the job no longer existing, how can this be if you are asked to re-employ?

Monsoon

Rachel wrote: »

Speak to CAB, what is employment like in your area, if difficult is it worth losing your job over? I know 5% is bad but 100% would be worse. Sometimes employers say it is only for 6 months has anything like that been said?

Sorry you are put in this situation. I hope you can work things out.

Rachel

I echo this.

I don't know the ins and outs of it, but if 90% of employees have agreed, then it does suggest most people see the rationale behind accepting.

I know pay cuts aren't nice, but given how many unemployed there are, and how many people on here say they can't get a job in accountancy, I would guess it's better to have a job on less money, than not have one at all.

Lynn S

Pay Cut

Thanks everyone for your comments. We are being asked to accept a cut with a review after 3 months.

Have spoken to Acas and my employer can give me notice to terminate my contract then offer me my job back at 5% less. Seems I don't really have much choice other than accept. Hopefully after 3 months my pay will go back up! Maybe not then. Wait and see

Lynn

blobbyh

oakley wrote: »

Regarding termination I would say it is not legal to terminate and immediately re-employ. You terminate employees primarily on the job no longer existing, how can this be if you are asked to re-employ?

Surely the core difference here is between voluntary termination and immediate rehiring of the same individual as a result of a genuine company need rather than involuntary termination and the hiring of someone else through a dubious motive?

As for the immediate rehiring, how does this affect your continuity of service? Are you essentially looking at a complete resetting of service from scratch and thus the loss of previously accrued redundancy rights i.e. the usual minimum two years required to qualify for statutory or company redundancy?

Also, if it's classed as a new employment, would you have to serve another probationary period? A fair question. And if so, then don't they then have the option to terminate permanently without notice or any other compensation within any such period?

Fireraiser

Lynn S wrote: »

Thanks everyone for your comments. We are being asked to accept a cut with a review after 3 months.

Have spoken to Acas and my employer can give me notice to terminate my contract then offer me my job back at 5% less. Seems I don't really have much choice other than accept. Hopefully after 3 months my pay will go back up! Maybe not then. Wait and see

Lynn

I'm surprised at this. My previous employer tried the same thing about 3 years ago. 100% of the employees told them to stick it. They didn't pursue it. To be fair, they didn't try the lie that it would have protected jobs, they were clear from the outset that their ultimate aim was to have as few European and US based employees as absolutely necessary.

My understanding at the time was they could not impose a pay cut. Nor could they terminate employment without good reason ie either a disciplinary issue or redundancy. Obviously they cannot justify terminating your employment for either of those reasons if they immediately re-employ you. Maybe the advice I received back then was wrong or maybe things have changed in the past 3 years. The only other thing I can think of is that it has something to do with length of service - I had nearly 20 years in at the time. I seem to remember that you don't get full employment protection if you've been employed less than 2 years.

For what it's worth, I'd start looking for another job now - this could just be the start of things and I really wouldn't hold my breath about getting your pay level back in 3 months. If the company is in such a poor state that it has to enforce pay cuts, what's the chance it's even going to survive another 3 months, let alone recover enough to reinstate the previous pay levels?

I hope I'm being a Cassandra and that things aren't that bad.

Good luck

oakley

If you are terminated and re-employed there may be a claim for unfair dismissal, it would be up to the employer to show they acted reasonably in treating you that way, this would be highly unlikely if you were back on full pay in three months for a 5% reduction.

The salary reduction and cost control that companies have implemented over the last two years would generally be seen as a success for both employers and employees and has saved a lot of people from being made redundant. In our case we had our best years last year since 2000 and have all received bonus payments and shopfloor staff lots of overtime to try and make up for the loss of pay for 12 months.

NeilH

Lynn S wrote: »

Have spoken to Acas and my employer can give me notice to terminate my contract then offer me my job back at 5% less. Seems I don't really have much choice other than accept. Hopefully after 3 months my pay will go back up! Maybe not then. Wait and see

Lynn

The issue I see here is that in order to legally terminate employment, there must be some ligitimate reason - disciplinary or redundancy needs are the first to spring to mind. Regardless, they need to follow proper procedure of termination (notice/pay in leiu redudancy consultation etc). In either case, if they imediately re-employ you then it could be argued there was no reason to terminate in the first place and thus the termination is not legitimate. Even if they "got away with this" initially it could be argued furher down the line that in fact there was continuity of service. Thats my tupence worth based on previous experience, all be it under different circumstances

Like the others have said, ACAS can be your first port of call but some solicitors offer a free initial consultation on these things. My initial feeling on your employer's response that they have won tribunals in the past was that it is a smoke screen to persuade you. Are you aware of any tribunals in the past? Also, how long have you worked for the company?

Let us know how things progress

Neil

Rachel

As far as I am aware the termination and reemployment is legal as long as there is a valid business reason ie the company will not survive without it and 90% of people agree. Length of service is not allowed to be affected in fairness.

blobbyh

If the termination and re-employment is consensual to both parties, employer and employee, and backed up by written documentation detailing terms of the new engagement, then why would it be illegal? I could only see it as a problem if the conditions agreed prior to the orginal leaving and/or rehiring were later breached by the employer.

But if continuity of service was not counted under the new employment and each 'new' employee was subject to passing a probationary period, then there's no way I would sign it. Fail your probation for any reason whatsoever and not only would you lose all those years of continued service from your previous employment - plus the compensation that would have gone with it had you been made properly redundant - but you might not get anything from your new one either.

How would the state see it? Say you had twenty years service under the old employment but were then let go after six months under the new one, either for not passing probation or just plain simple redundancy. Would the state simply see it as six months only and thus you'd be entitled to no redundancy pay whatsoever?

Besides, do you really need to be terminated and re-employed just to allow the company to give you a 5% pay reduction if most or all employees are willing? Is this common practice?

Reminds of the time years ago in one of my old jobs, where one of our warehouse packers left on the Monday and re-started on the Friday! Didn't count as continuous service...!

T.C.

Right or wrong, this type of thing is happening at the moment and perhaps you should be glad to have a job, so many haven't!

NeilH

Hi

The following link may be of use: http://www.nortonrose.com/knowledge/publications/2009/pub19429.aspx?page=090203094005&lang=en-gb

Putting the re-employment asside, the termination is still termination and has to be handled appropriately to avoid breaches of legislation. Also, the article in the link above mentions the employer should offer continuation of employement, though it isn't clear if this is continuation in a general sense or a continuation of service.

Neil