20% pay cut, but work same hours?

[Tippytoes]

The company I work for has asked all staff to voluntarily take a 20% pay cut in these tough times. They expect us to still work the same hours as before - is this fair? Also, they say it is voluntary, but what would happen if you said no? Thanks

Hmm... difficult one... I'm assuming it's a small company???

I'd check a few things first:

One, the reasons for the reduction need to be clearly defined - and under what conditions does it return to it's normal level?

Are there any 'bonuses' in place (if the company does well in the next five years for example) - can you earn the 'lost' money back?

I think there should also be a few concessions about working practices... I appreciate they need you to work similar hours - but perhaps a little flexitime / an early finish one friday a month???

It's voluntary - so there is not much they can do about it if you say no, BUT.... if they can't cut costs, they might look at redundancies - and THEN it might be taken into account!!!

In the 70s the company I worked for cut down on their usage of electricity etc by closing for 2 days (notorious 3 day week!) whilst still paying staff full salaries. I would want to know that my company had cut down on overheads as much as possible before taking a wage cut for same hours.

It's not uncommon now I think, but I would return to the negotiating tabe and ask what they are prepared to offer in return- as poeple have said, flexi working / time off etc.

It may be well that's what they are anticipating, an opening of discussions rather than a blanker yes.

Or you could offer 10% reduction.

TBH 20% is such a massive reduction that many won't be able to afford it, anyhow.

It is a large company with lots of offices. It is for 12 months, but there is no mention of clawing back the lost money at all.

Also, a number of people have suggested that they could take on other employment for the one day a week - not possible for most I know, but some have already got something lined up, but now they won't be able to do it and it has been strongly advised not to by the company.

I don't buy it being voluntary, as I think the ones who don't will be next up for the chop!

Agree with haribosmummy's things to check. Whether it's 'fair' or not is really a question of whether it's everyone or not. If it's voluntary I assume it's a vote situation, either they do it or they don't?

I would certainly advise you try to negotiate a reduction in hours, or at least some flexibility.

You need time limits for reviewing the situation and to know what happens afterwards.

You must also be clear what will happen if you don't. Companies don't usually propose anything like this unless the only alternative is redundancies, but they should make that clear so you can make an informed decision.

What do your colleagues think? it would be a good idea to come up with alternative suggestions to cut costs if you aren't happy with this one.

Hmm... Large company / lots of office and for a specified time period...

All of those things make me think this is a nice little cost cutting exercise by a boss / consultancy who will get a lovely little bonus by cutting costs.

Large / multisite offices are notorious for wasting cash.

I still wouldn't rule NO out of hand, BUT!!!!!

1. Def. there needs to be some compromise
2. You need to agree that, should you leave for another position OR need to take out credit (mortgage etc) then they will report your wages AT WHICHEVER AMOUNT YOU ASK THEM TO. Obviously, you will pay tax at the lower rate, but if you leave for another job, you would want the higher figure to take prescendence.

I'd be feeling uneasy though.

err.. no, not until waht jux said had been looked into, i know times are hard at the moment, but do feel some companies are jumping on the bandwagon, same work, same hours less money mmmm not a lot of give and take there, I would also want to know what the "bosses" are doing to help the situation, not a lot would be my guess

Thanks for all your advice!

Its not a vote situation, a number of people have refused to do it, but others are doing it, which really seems unfair. There is no mention of what will happen if you don't 'tow the line'. We had one week's notice of this as well, so there wasn't much time to decide on anything.

Think most people in this office are of the opinion that if we don't do it, then you could be the one to be made redundant if it comes to it.

We have suggested lots of 'little' ways to cut costs in our office alone, but nobody does anything about it, even little things like sending out 2nd class post instead of 1st and buying our own tea/coffee instead of the company buying it. Not sure these things would help in the scheme of things though.

Tricky one.

DH had to ask his staff several months ago if they were prepared to take 10 % salary cut or some unpaid holiday.

The general consensus was no.

5% were made redundant very recently.

Exactly, Tippytoes....

There are LOTS of ways to cut costs. Of course, all the little things being suggested would still help.

Cutting salaries in return for reduced hours for some staff and not others isn't a problem.

Cutting salaries for some staff but not others and everyone still works full time isn't fair at all. Seems unlikely they'd get many volunteers for that as well!

Is there a union? Or some kind of employee representative body?

No, we don't have any union at all here.

There is one guy here who has recently gone to 3 days a week. He was asked, along with the rest of us, to take 20% cut, but he refuses as he says he has already dropped 2 days, but this was completely his choice, and so others are feeling bad towards this guy. Do you agree he should have been asked? The office morale is so low at the moment and it is a shame as we all get on so brilliantly and this is causing bad feeling and people talking behind backs etc.

I'm not sure what you are saying? Do you think he shouldn't have been asked? As I understand it at the moment, it's voluntary, so everyone should be asked, and equally everyone can say no. Not sure why this guy is any different? Fine to ask him but also fine for him to say no.

You should all be working together in terms of what you do about this and how you address it. I would suggest you organise a meeting of everyone and talk through all the concerns so that you can come up with some kind of unified response in terms of alternative suggestions, and raising the queries mentioned in this thread.

I think he should have been asked, just like the rest of us, but HE thinks they have a cheek asking him when he has already taken a drop to 3 days.

We have all already had to make our decision, as I say they gave one weeks notice of it starting, but only one DAY to make up our minds! As I say, most people have done it as most think 'better to have a job than no job at all'.

I don't think a week is a long time span for notice of a change to contract, is there no provision for negotiation in your contract?. might be worth a call to acas for clarification and a oogle of the company (googling DH's company post reduindancy run alerted us to the fact that if headn't gone with it then he'dprobably have been forced into it anyhow)

This hasn't been handled at all well and if I were you and your colleagues I would seriously consider writing collectively and withdrawing your consent to this change on the basis that you felt pressurised into doing it and had no meaningful consultation or explanation of the alternatives.

It's not really a question of what's fair. It seems like the company needs to cut its costs and rather than lay people off, they are asking for a volountary cut in wages so everyone keeps their job if possible.

Since they have asked for 20% from everyone, they are probably expecting 10-15% overall cut in salary cost which would be the likely rate of redundancies if everyone said "no" as far as I can see.

They don't need to consult about anything if they are asking people to volunteer.

What they absolutely CANNOT do is select people for redundancy (if it comes to that) based on whether or not they volunteered for a pay cut. This would be instant and automatic unfair dismissal, I think.

I think each individual would have to decide if they want to take the cut or not and take it from there. Just don't feel like you should somehow be more at risk than anyone else in terms of redundancy if you decide not to. That's the key.

Everything flowery said. The company has not thought this through at all and is executed extremely poorly with stunning lack of communication.

Tippytoes, has the company explained what its financial position is and that compulsory redundancy is on the cards? Was it explicitly explained that if an employee accepts a pay cut (for same hours), they would not be at risk in subsequent redundancy exercises? If so, for how long? If not (and this is just the employees' assumption), there is nothing to prevent the company from 'tricking' an employee into a pay cut and still make them redundant shortly thereafter because they could not (unsurprisingly) find enough volunteers.

This idea that employees can voluntarily refuse to take a pay cut with no articulation of the consequences (eg those who volunteer end up being safe) is just silly. As is the way it is executed because there is no criteria of determining who is surplus to the company's needs in which area and their value to the business, beyond who does or does not volunteer.

Is the management normally this clueless?

brightwell, I have just read your post. I am not an employment bod so would appreciate clarification.

Is it legally right to use volunteering as a grounds for making someone safe for subsequent redundancy exercise ie have it within the criteria for selection?

How did companies, like say KPMG, implement their 4-day week, sabbatical? I imagine it would be voluntary with an incentive for employees to take it up eg reduced hours but pay reduced by a smaller proportion. Presumably those who don't volunteer are at no greater risk of redundancy that those who do.

Other companies I understand put these to a company-wide vote and say they do not proceed with reduced hours/pay etc unless they get votes of a certain percentage, say 75%, of employees. The alternative to not getting the requisite 75% acceptance is then a compulsory redundancy exercise for all.

Thinking about it a bit more......

Companies are obliged to start consulting with employees on redundancies pretty much as soon as management is "contemplating them". It sounds to me like they have got to this point already and should identify that x% of roles in the business are at risk. The point of this consultation is (amongst other things), to give employees the chance to come up with alternative suggestions that may avoid or reduce the impact of the company's proposals. One of these suggestions could be that everyone takes a pay cut but it seems that the company has jumped the gun and made that proposal already.

Maybe the way it should have been done is:

Company: Economic conditions are tough and the business is under pressure. There is a need to make x% of the workforce redundant to secure the future of the business. We will look for voluntary redundancies and also start the process of consultation with those affected by possible compulsory redundancies.

Employees: We could take an x% pay cut and all keep our jobs, maybe?

At least they would then be starting from a point of giving everyone the full picture. i.e. if nothing else happens we will lose x% of our staff.

I simply can't believe that the company is asking for a 20% voluntary pay cut and is not "contemplating" redundancies. In which case, they should be formally consulting already.

Why don't 2 or 3 of you get together and spend half an hour with an employment lawyer?

Blueshoes - I can't answer on the 4-day week thing (apart form to say that since it's a variation of contract, it must have been with agreement of the employees in some way) but I do know about the process of redundancies (from both sides of the process!).

The employer simply cannot use the refusal or otherwise to take a pay cut as a criteria for selection when it comes to putting roles at risk of redundancy.

The criteria for selection can be complicated depending on the pool of roles that are at risk. And don't forget that (under the law) it's "roles" that are made redundant, not people, based on the fact that the legality of redundancy rests in the employer proposing a particular role has "ceased or diminished" because of the economy/market etc. (or some wording like that). It would be impossible to argue that Mrs. Smiths role had ceased or diminished because SHE had refused to accept less pay than the employer had contractually promised her.

If the roles are many and varied, then they often select themselves if a business turns down but if there are a lot of people performing very similar roles, say, in a factory or call centre, then there are often pr-agreed criteria like first in - first out, skill level and the like. These criteria have to be justifiable and not unfairly descriminatory.

I'm not an employment lawyer and I could be a bit out of date but I think that's the way it works.

I don't think it's necessarily as clear cut as that brightwell1. Using salary level as a redundancy selection criteria is obviously not good practice, particularly if done in isolation but I don't think it's necessarily automatically unfair.

If the reason for redundancies is cost saving, and perhaps by making some of the higher paid employees redundant it is then possible to make fewer people redundant, for example, that sounds like a reasonable justification to me.

The risk with using salary as a criteria is age discrimination, as older employees tend to be better paid. So it would never be advisable to use it, and obviously things like skill levels, attendance records and performance records are much better practice and much easier to demonstrate as objective.

But I think saying that using salary level as a reason for redundancy would be automatically unfair isn't the case.

brightwell, that makes a lot of sense. "It would be impossible to argue that Mrs. Smiths role had ceased or diminished because SHE had refused to accept less pay than the employer had contractually promised her." - totally agree.

Hence, in Tippytoes' case, if she refuses and rightly so, she cannot legally be put at greater risk of a redundancy than any of her colleagues, whether or not they volunteered to take a pay cut.

Would be worthwhile to seek legal advice on this. I wish I knew but i am sure there are some voluntary bodies who can give some initial advice.

My hubby's had something similar - his company have stopped paying overtime. But he's still expected to work overtime in order to get the job done. His overtime used to amount to approx an extra 25% (after tax) on his wages. So its been a big drop in income for him. It was voluntary.

At first I just sort of accepted it as its a small company and I just thought it was a sign of the tmes and its betetr this than the company goes bust and DH is out of work. Though now I wonder if the company are just playing on everyones' fears - DH says the amount of work coming into the company hasn't gone down and they're really busy. Guess they know that thses days though people are going to struggle findign work elsewhere so they put up with it. In the meantime the directors get more profit.