Help!?.. Salary reduced with no warning?!

danlovedough

I probably have no legal grounds to fight this with my employer but feel completely helpless and thought it may be worth trying to get some advice here.

I have worked for the same company for 7 years, but last April got asked to help set up a new business which I have been doing.

My job has historically been commission based and i was earning £80k-£100k between 2008 & March 2011 when i took this now role.

Stupidly (trustingly) I didn't get signed contracts when i took the new role on so have been working on my old contract which is a £19k basic+ commission, however the company have paid me a basic salary of £75kpa while i set up the new business.

Sadly the business has not taken off as much as we wanted and is likely to post a loss for the 1st year, and on finding this out the owner of the overall business has said that my basic wage will be cut to £30k immediately with £10kpa guaranteed bonus for the next 3 months if i am to continue working on the business. There is also a commission structure with monthly / quarterly / annual bonues for success.

This in theory is fine, but the immediate drop in salary is hard to take as i was not expecting this, have been given no time to plan financially and have 3 young children, a lot of debt and a wife who does not work.

I'm confident that i have no grounds to complain but it feels unfair that my basic salary can be cut by so much with no notice. I would be happy for the salary reduction to start fro, 1st week in April which i suggested to the employer but they said that they will not do this and it has to be immediate, or else i have to leave the business. (also they promised from the start of the new business i would have10% equity in it)

I know this is all my fault for being too trusting and will make sure i get proper contracts in place for all agreement going forward, but my main question is can they legally / (morally?) make such a cut in basic wage without notice>?

Thanks

Russe11

Don't know what your worring about, most sales people jump ships when the flow stops, why don't you? If you can generate 1million a year in sales, which 80-100k would equate to in commision only then i'm sure you know theres loads of businesses that would be happy to have you.

10% equity is worth nothing in some business and fortunes in others.

wapow

Im guessing he is worried because he made the rookie mistake of spending beyond his means and now he wont have the finances to support such a lifestyle he planned and executed without the initial funds.

danlovedough

wapow wrote: »

Im guessing he is worried because he made the rookie mistake of spending beyond his means and now he wont have the finances to support such a lifestyle he planned and executed without the initial funds.

Yep, pretty much this.. managed money quite badly, have high outgoings every month. a drop in salary is fine, but would have liked at least a few weeks notice rather that having basic wage cut in half overnight

danlovedough

I would add to this that it's not as simple as just jumping ship.. geographically this job is ideal, and there's not too many other options close to home.. The over business owner runs a number of successful businesses turning over multiple millions so my 10% has a decent chance of having some value eventually..

KiKi

If your 'basic' wage has been £75k pa for some time, and as this was as a result of taking on a new role within the company, I would argue that it is a) at worst a breach of T&Cs as you were clearly working to a new contract and b) at best an implied change in your T&Cs as you were no longer working on a commission basis. Ie, you are working to a new contract. Your employer initiated it, expected this of you - as did you - and you continued to work on this basis.

The lack of signed contract is somewhat irrelevant as you are working in a different job and can prove basic salary through your payslips. Do you have any evidence aside from your payslip that you are in a new role with a different salary? Emails? A letter?

To reduce your salary with no warning would be a breach of contract within both a new contract or your implied T&Cs. If they wanted to move you back to your previous £19K plus commission contract then that also required notice.

I would go and see an solicitor who specialises in employment law as I'd say you do have a case ('specialises' being the important thing here). You need expert advice.

However, you also need to consider to what extent you're happy to kick up a fuss over this. They can give notice to change your T&Cs anyway, so the change could be enforced, but in the meantime they've decided to make your life hell. You could also just ask to go back to your old role and contract and that might make things easier.

HTH
KiKi

danlovedough

The way they explained my wage would be structured when we started up last year was that they would give me a basic salary (didn't exactly specify and amount), and that they would guarantee that my earnings would be in line with slightly lower than the previous year (£85k)

When I wrote the forecast for yr 1 of the business I set the basic amount i would be paid at £75k. They agreed that this would be paid on an ongoing basis as guaranteed bonus until further notice, but with the expectation that this would gradually decrease over time as the business starts to make money to pay me commission.

I expected and hoped to be given more notice than 2 days for a reduction, and for the salary to reduce more gradually than £75k>£40k>£30k

nightingalesgarden

Dan,

Is your overall package actually dropping? Is your concern about your monthly payments going down or that you want a larger contractual monthly payment and a lower OTB?

I think this is what you are saying:

Basic salary + non contractual OTB paid up until March 2011 (19K+OTB = average £85K PA)

Basic salary + average of non contractual OTB paid until now to compensate for lack of OTB while doing a different role(£75K overall)

Going forward - Basic salary + quarterly OTB/commission plan (£30K + (£10K first quarter, then sales OTB for Q2,3,4 = £40K + ?? £40/50K = £80/90K))

I think it is reasonable to ask that the guaranteed OTB element is paid monthly for the next 3 months (rather than at the end of Q1) which will keep your salary roughly static but then you are likely to have a large gap until the next payment as I presume the quarters are paid a month in arrears

Hopefully enough time to arrange a payment holiday on your mortgage until you can make a balloon payment in the autumn.

Alternatively you could negotiate 6 months of monthly payments - all to be resolved - Claw back or pay up in Q3....worth a try...

I doubt that you can argue that you have a contractual right to a £75K salary because what you describe is not unusual - they guaranteed your overall package for a year in order for you to do an alternative role where OTB was not relevant and even though they paid this monthly not quarterly the bonus element is likely to remain non-contractual.

Note - I'm not giving you legal advice - This is my opinion based on the fact that I am responsible for 1000 sales people in the "real" world :eek::eek:

danlovedough

Thanks for the advice..

My main concern is the lack of notice or warning. one minute i'm comfortable with a guaranteed take home of £4250 each month, my standard outgoings are about £3k-£3.5k so I can live comfortably on this.

As of tomorrow I will be taking home more like £2500 each month which leaves me at least -£500 each month unless I can somehow make commission. From June it will be more like £1800 and i have no idea how I would survive on this.

I don't mind a reduction if they say for example the basic guaranteed otb will drop from April 1st, I have the £750 extra to save from March wages, to provide a bit of extra cashfor the first few months drop in salary, and I also have time to plan and organize how to reduce my monthly outgoings,: Sell one car, arrange a cheaper car, cancel the gym membership, reduce the sky TV package etc.

The arrangement I had until now was £75 guaranteed inc. unspecified otb + 10% share of net profit annually. They also agreed to pay me commission on my personal billing monthly at 10%, but my role had been quite managerial so was not really billing much personally..

They say they would like me to bill more money individually, so will be focused on that earning 10% of gp monthly that I personally bring in. The quarterly bonus will be 5% of company net profit (before tax), and I will also receive 5% of net profit annually. What I have now is a lower package but it does make sense for the business, which is more likely to be profitable in 2012-2013 with lower monthly salary being paid out for me.

My main issue is not the overall package (which although it's lower, i think is not bad), but that the reduction in wage is without notice and will leave me with serious financial problems in the short term.. Possible default or bankruptcy if i am unable to start making commission by June 2012

findingmyownway

danlovedough wrote: »

Thanks for the advice..

My main concern is the lack of notice or warning. one minute i'm comfortable with a guaranteed take home of £4250 each month, my standard outgoings are about £3k-£3.5k so I can live comfortably on this.

As of tomorrow I will be taking home more like £2500 each month which leaves me at least -£500 each month unless I can somehow make commission. From June it will be more like £1800 and i have no idea how I would survive on this.


... the reduction in wage is without notice and will leave me with serious financial problems in the short term.. Possible default or bankruptcy if i am unable to start making commission by June 2012

I can't offer much advice on the emplyoment law, but I strongly advise you head over to the Debt-Free Wanabee board for some help with reducing your outgoings to fit your new circumstances. Post a statements of affairs (SOA) on there to details your outgoings and (new) income - you will get some great ideas on how to manage.

danlovedough

Hi Everyone,

It's been a little over a year since i posted here and wanted to give a quick update but most importantly say thank you to all who posted in this thread and gave advice. The advice i received here helped me through a very difficult period in my life and i'm grateful.

Thankfully things with work have improved over the last year, and I am now in the process of negotiating a salary increase with the aim of having my basic salary increased to £55k from July. Also will be due an annual bonus at the end of July which will help to repay some credit card debt.

Some of the advice here which i took on board and used / found helpful:

Shopping at Aldi - Very helpful indeed - This place is great, they shopping experience not so fun but great value. I mostly shop at waitrose & sainsburys now but will regularly visit Aldi for essentials and have started did one weekly shop in Asda this month. Overall Aldi is by far the best value.

I did cut back on some things
- TV - Scaled back sports channels and phoned Sky to tell them they needed to discount my package which they took £10 off and gave me £25 towards a new remote as i told them my remote is broken (which it is)

- Gym membership - Cancelled this and went without gym membership for 3 months. Tried a cheaper gym but joined back up a the old gym in January. It's worth every penny as long as i visit at least 3-4 times per week. I also joined up the rest of my family on a group deal so get more usage of the membership at the same time as spending time with the children.

- Phone contracts - I have a work phone now so will end my personal contract within 6 months. Made a poor decision and bought an iPad on 2 year 3G contract which rarely gets used.

I came close to selling my smaller car in August, but eventually managed to persuade my employer to increase my basic salary by £5,000 per year to cover the car cost, as it was seen as a useful thing in my job to have a car.

I'm still not great with money but have become more aware of putting something away for the future and focusing more on paying off debt now and reducing interest payments. I aim to have the majority of my credit card debt and my smaller car paid off within the next 6 months, which would just leave mortgage debt & the 2 remaining years of payments on my larger car at £330 per month.

Medium term I aim to save up deposit for a larger house within 2 years and take advantage of the government help to buy scheme:
http://www.hm-treasury.gov.uk/10012.htm

With this scheme I think buying a £300k house could be feasible with a deposit of £12k so the aim is to pay off debt then save this deposit up as fast as possible.

One of the challenges i'm facing now is having the discipline to save up this deposit money. I'd love a nice holiday or a new car, but I really think it's important to have a larger home as our children are growing up fast and will need more space as they grow.

With basic increased to £55k I would still be entitled to my current management bonus 5% of monthly net profit, and 5% of annual net profit, but not commission for personal billing which i currently receive. The salary rise is not confirmed yet but the indications are that it could be in place by end of July.

Updated Statement of affairs based on expected basic of £55k:

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 3
Number of cars owned.................... 2

Monthly Income Details
Monthly income after tax................ 3238
Partners monthly income after tax....... 0
Benefits................................ 50
Other income............................ 100
Total monthly income.................... 3388

Monthly Expense Details
Mortgage................................ 520
Secured/HP loan repayments.............. 500
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 120
Electricity............................. 100
Gas..................................... 75
Oil..................................... 0
Water rates............................. 45
Telephone (land line)................... 10
Mobile phone............................ 120
TV Licence.............................. 15
Satellite/Cable TV...................... 70
Internet Services....................... 10
Groceries etc. ......................... 600
Clothing................................ 200
Petrol/diesel........................... 100
Road tax................................ 50
Car Insurance........................... 75
Car maintenance (including MOT)......... 20
Car parking............................. 25
Other travel............................ 25
Childcare/nursery....................... 0
Other child related expenses............ 100
Medical (prescriptions, dentist etc).... 10
Pet insurance/vet bills................. 0
Buildings insurance..................... 15
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 25
Haircuts................................ 5
Entertainment........................... 100
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2935


Assets
Cash.................................... 1000
House value (Gross)..................... 140000
Shares and bonds........................ 0
Car(s).................................. 15000
Other assets............................ 2500
Total Assets............................ 158500


Secured & HP Debts
Description....................Debt......Monthly.. .APR
Mortgage...................... 125000...(520)......6.8
Secured Debt.................. 12000....(500)......9
Total secured & HP debts...... 137000....-.........-

Unsecured Debts
Description....................Debt......Monthly.. .APR
Virgin Card....................4000......100.......30
Barclaycard....................5000......100...... .29
N/Rock Unsecured...............25000.....110.......7
Total unsecured debts..........34000.....310.......-


Monthly Budget Summary
Total monthly income.................... 3,388
Expenses (including HP & secured debts). 2,935
Available for debt repayments........... 453
Monthly UNsecured debt repayments....... 310
Amount left after debt repayments....... 143

Personal Balance Sheet Summary
Total assets (things you own)........... 158,500
Total HP & Secured debt................. -137,000
Total Unsecured debt.................... -34,000
Net Assets.............................. -12,500