40% pay cut

mattyj0

our employer is proposing a 40% paycut based on him losing money last year.
over christmas he made 12 people redundant and wrote to everyone else saying that it was due to economic downturn etc. and that hours of work would be fixed at 40 no overtime and that a 25% pay cut with a bonus scheme may be introduced.

Well he has called us all in and is now proposing a 40% cut with a bonus scheme. We have also been told that we either accept it or leave

Although blaming this on the credit crunch we are just as busy as we have always been

Any thoughts as I can't believe that this is legal

SomeBozo

Yes it is legal, the employer can cut wages/hours if the business is suffering. They have to give notice.

Bozo

CFC

mattyj0 wrote: »

our employer is proposing a 40% paycut based on him losing money last year.
over christmas he made 12 people redundant and wrote to everyone else saying that it was due to economic downturn etc. and that hours of work would be fixed at 40 no overtime and that a 25% pay cut with a bonus scheme may be introduced.

Well he has called us all in and is now proposing a 40% cut with a bonus scheme. We have also been told that we either accept it or leave

Although blaming this on the credit crunch we are just as busy as we have always been

Any thoughts as I can't believe that this is legal

Hi Mattyjo,

Although some employers are just using the economic climate as a handy excuse to avoid pay increases etc, I do not think that this is the case here.

Your company may be as busy as it ever was, but the owner is saying that it is not as profitable as it was and in fact is losing money.

This situation can come about under the following examples of events:

the company runs with a lot of bank loans and is having to pay sky high rates to borrow any money at all

customers have defaulted on invoices so have never paid for work/goods

customers have used the economic climate to force your company's profit margins down

prices from suppliers have risen due to shortages but the company is unable to pass this increase on without losing the business

If a company is losing money, it won't stay in business long. So the owner needs to either cut costs or raise prices to gain a greater profit margin. It looks as if the situation is very bad if he is proposing to cut wages this dramatically.

ceridwen

A bit of misinformation going on above methinks from SomeBozo....


See:

http://www.guardian.co.uk/money/2009/jan/11/pay-cut-employees

Basically by law employers cannot unilaterally cut employees pay.

jacklink

The child support agency have been taking 40% of mens wages for years

savemoney

Useful link that one above

mattyj0

would I be right in thinking that by forcing us to either accept the paycut or he will force us to resign there would be a case of construtive dismissal?
and if we did refuse surely by law he has no choice but to make us redundant thus I would get 15 weeks pay of full pay?

mattyj0

and what is meant by unilaterally cut an employee's pay??

SomeBozo

Ceridwen

I still wince when I see advice you give regarding the legal aspects of employment. I tend to stay out threads you have contributed on as your advice seems to be far too emotive rather than based on common sense and employment law.

I saw and read the link from Neasa at the guardian when it was published last sunday. Much of what she suggests is based on what happens if a change in pay is successful, ie change on redundancy terms, benefits, pension, mortgage protection.

What the article does not talk about, or elaborate on is the your rights prior to a employer offering a pay cut in leiu of a potential redundancy or company going out of business.

Basically an employer can offer a pay cut instead of making staff redundant. Its a bad decision all round, but most staff would rather earn 60% of something than 100% of nothing. There is nothing illegal with suggesting or foricing the issue. Of course it can't be done on a whim or every employer would do it, but to suggest (as the article does) that its "illegal" is such bad advice to the point of taking the employee straight to the job centre.

Since I now refuse to contribute anymore to a post that Ceridwen has "helped" on I will leave this thread, but if the OP wants to PM I am happy to help away from the thread.

Regards

Bozo

ceridwen

"unilaterally cut an employees pay" = an employer deciding all on their own that they will cut an employees pay - without stopping to check whether the employee agrees or no.

Some employees would indeed agree to a paycut if their arm was twisted by being told "Its either that - or you're redundant. Take your pick.".

I would say that its up to each employee individually to decide for themselves which of these two options they would choose if it comes to such a situation. I personally took heart from the article that even if my colleagues as a whole agreed to a paycut - I myself could turn round and refuse to accept a paycut (though I would thereby be exposing myself to the risk of redundancy - but thats my choice to make if it seems to me to be the lesser of two evils). My personal choice - and I stress that it would be MY personal choice only would be to refuse to accept a paycut and cross my fingers that I wouldnt be made redundant (but if I was, I was and I would rather be redundant than have a paycut). I know others would make a different decision in these circumstances - it is up to each individual to decide for themselves which is the lesser of two evils in these circumstances.

Hopefully someone will come along soon who is more up on the law than myself and can clarify further on this article.

We need someone like Little Voice or Oh Really to come in on this debate hopefully. SomeBozo has said himself before now that he is involved in a firm that helps employers cut their costs (ie labour costs). So - though I am very much on employees "side" in this - SomeBozo is very much on the employers "side".

LittleVoice

I believe that whilst the employer cannot force a paycut unilaterally (because it requires agreement to change the terms of the contract), if an employee does not accept the change and the business really does need to cut costs it can dismiss the employee (not make them/the job redundant - because the work still needs to be done). In those circumstances, they could then offer the job to the dismissed employee on the reduced pay terms - and the person could decide whether to accept.