Due to the current climate, an employer would like to reduce working hours to three days per week. Esther Smith and Matthew Whelan advise on the legal implications to be aware of in terms of a reduction in pay.
If we want to reduce employees’ working hours so they only work three days per week, what are the legal pitfalls associated with reducing their pay to 60%? What steps do I need to go through to achieve this?
Matthew Whelan, solicitor, Speechly Bircham
Unless you have a right to reduce hours and/or pay, then ideally you should obtain and properly record each affected employee’s agreement to this change. I would recommend that you take legal advice on whether you have a right to do this as it would be very unusual for you to have such a right and, even if you do, then you would need to exercise this with care.
In the absence of a right to make this change or consent from the employee, you will probably need to dismiss the employee and re-engage him/her on new terms and conditions to ensure the change is properly implemented. The steps that you need to take are complex and require a careful approach, meaning there are quite a few legal pitfalls involved. You may need to engage in collective consultation, depending on the number of employees involved.
There are a number of risks and possible legal claims involved if you get it wrong. For example, if you try to impose the change on the employees, without their agreement, then that could give them the right to resign and claim constructive dismissal. If you went down the route of dismissing and re-engaging, then you should observe the employee’s notice period although, even if you do this, if they have the requisite length of service they would still be able to claim for unfair dismissal, even if they accept the new terms and conditions. You may be able to justify the dismissal as fair, depending on the circumstances and whether you have followed a fair process.
In short, therefore, if you can obtain the employee’s agreement to the changes and properly document this then this is preferable. If not, then you should take legal advice on how to implement the change as this is a tricky area.
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Esther Smith, partner, Thomas Eggar
Any change to contractual terms and conditions (which would include hours and pay) would be a matter for discussion and negotiation between the parties. A contract of employment is bilateral so the employer should not be making unilateral changes without the employee’s agreement.
You should consult with the employees concerned to explain what changes you wish to implement and the reasons for those changes. The more the employees understand the rationale behind the decision, the more likely they are to accept and agree to it.
If the employees do not agree to the changes you do have the option of imposing the changes on them. You can either do this by terminating their existing contract on notice and offering re-engagement under the new contract, which carries a risk of an unfair dismissal claim, or imposing the new terms as to hours and pay from a certain date, which carries the risk of a constructive dismissal claim. The strength of any claim will depend enormously on the reasons for needing or wanting to instigate the changes.
Esther Smith is a partner in Thomas Eggar’s Employment Law Unit. For further information, please visit Thomas Eggar
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