need to know:
- Reducing pay to reflect hybrid working can create significant legal and practical challenges, with implications for organizational fairness and inclusion.
- With the exception of salaries that already vary by location, for example, those with London loads, their consent would be required to reduce an employee’s pay.
- A two-tier pay structure where new recruits are paid differently depending on where they do most of their work can deter new talent from joining.
While the pandemic has given employees more freedom of choice in where they work, for some, this freedom may come at a cost. Major tech firms including Facebook, Twitter and Google are planning to cut salaries of employees who choose to move away from their head offices. Last summer Google announced that its employees would face a pay cut of up to 25% if they worked remotely.
A survey of UK business owners, CEOs and senior managers published in August 2021 by HR software firm CIPHR found that two-thirds (68%) have given all or most of their employees the option to work remotely, The same proportion are thinking about reducing the salaries of employees who wish to work from home permanently.
However, it appears that only a small number of employers in the UK are going the same route as Google, as the Chartered Institute of Personnel and Development (CIPD) is the latest. reward management survey, published in February 2021, revealed that only 7% of organizations had changed pay to reflect homework, or were planning to do so.
Charles Cotton, senior performance and reward consultant at CIPD, says: “While some employers may be tempted to reduce pay to reflect hybrid working, the reason some have done so is because there is considerable legal There are practical challenges, not to mention the impact on organizational fairness and inclusion.”
An employee can expect a pay cut only if their salary already varies by location; For example, if they have loads of London and are no longer living in the capital or traveling to work every day. Further, the salary of an employee can be deducted only with their consent. “If it is forced without their consent, it would be a breach of contract and employers could be taken to a tribunal,” Cotton says.
Nevertheless, the emergence of hybrid working has led some employers to question whether wages should be adjusted to account for the reduction in time and costs to come. As Simon Whitehead, employment partner and head of the recruitment sector at law firm Brabners, explains, commuting time is generally not treated as work time, and commuting costs are largely borne by employees. Therefore, the possibility of such an approach is legally questionable.
“Location never contributed to how wage levels are determined in the UK,” he says. “Instead, wages are determined by an employee’s skill and the amount of work they perform. Employees’ consent is unlikely to be given solely on the basis of commuting changes, unless the expected output in return is There may not be some uniform reduction in quantity, or some benefit to encourage employees to accept the change.”
If an employer cannot secure agreement for the proposed changes, they will be required to terminate existing contracts and issue new ones in their place to enforce the variation. However, the use of such a ‘fire and re-hire’ strategy could lead to a huge employee and public backlash, which could have huge reputational ramifications. Whitehead adds: “It is also difficult to execute successfully due to the collective consultation requirements and the fact that technically, employees’ contracts will be terminated with the risk of tribunal claims.”
As de Cokle, chief executive and co-founder of global payments platform Boundless, explains, the revised contracts will need to reflect more than just pay. “Address, working hours, adequate time-tracking of overtime and employee health and safety will all need to be addressed anew,” she says.
two tier structure
Another option for employers could be the introduction of a two-tier pay structure, with new recruits being paid differently depending on the amount of work they do. But given the popularity of flexible working, new talent may be deterred from joining the organization, as Cotton points out. “Flexible working and technology means you can employ people from anywhere in the world, employers from anywhere in the world can also recruit your employees, so the pay cut will hurt you in the current tight global labor market. can put in.”
Such a move could also undermine equality and diversity initiatives, negatively impacting equal pay objectives. It also sends a message that employers do not value flexible working employees as much as those who are in the workplace on a full time basis.
Employee benefits provider Santé Group hasn’t seen any signs of this trend among its customers yet. Chief executive Paul Nugent says: “We certainly haven’t seen a knee-jerk reaction to pay changes, but what we’re seeing is employers focused more on ‘doing it right’ when implementing hybrid working.” For example, reviewing health and safety and looking at better ways to manage people when they are working remotely.”