PAY - 17.09.2020

Cut pay for permanent homeworking?

Following the lockdown, you may receive requests for permanent homeworking. Could you agree to them in return for a pay cut?

Work around. For those who transitioned to homeworking during the pandemic, it was a temporary change to the employment contract, although many are seeing the benefits of a permanent homeworking arrangement.

Time to change. Research indicates that 20% of employees would now accept a pay cut in return for a permanent homeworking arrangement. The average amount they would accept is a 7% reduction in pay. For somebody earning £35,000 p.a. that would become an annual salary of £32,550. In addition, there would be a reduction in your employers’ NI and any pension contributions.

A condition? Most employees probably won’t offer to take a pay cut when they request a permanent homeworking arrangement. So could you make it a condition? Legally, there is nothing to stop you doing this - as there will be a permanent change to the employment contract, you can offer a new salary and other terms.

The legal minimum. What you can’t do is offer the employee anything less than their statutory rights, e.g. in relation to the national living wage, national minimum wage or holiday entitlement. Also, a pay cut should be applied equally and consistently to all permanent homeworking requests. In the event an individual is singled out or treated differently, it could give rise to a discrimination claim.

Tip. Where an employee accepts a pay cut in return for a permanent homeworking arrangement, you’re under no obligation to return their salary to the previous higher amount if they later return to your workplace, either temporarily or permanently. This would be a matter for negotiation.

You can do this, but the condition must be applied to all permanent homeworking requests, i.e. you can’t single out individuals for a pay cut. 20% of employees would take a 7% pay cut in return for permanent homeworking.

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