COVID-19 EXPERT LEGAL INSIGHTS

Taking a pay cut - is it the right thing to do?

17 April 2020

Star footballers are under pressure to volunteer to take significant pay cuts in light of the Covid-19 epidemic.
 

Chief Executives and Board Members are too. Not only may it be morally important at a time when a company's financial performance may be down (in the case of airlines) or booming (in the case of supermarkets), when dividends have been cut (in the case of listed institutions), government backed loans applied for (SMEs) or when staff are being furloughed (which applies to some 10% of all businesses according to the latest Treasury estimates).  But reputationally it may be important too. Some media outlets are already running a competitive league table of which CEOs and Chairman have made an all telling gesture or concession, with a special interest as ever in leaders in the financial services sector from high street to investment banks.

Yet the question of whether to take a pay cut may apply as much to other senior managers and executives from traders to accountancy firm partners, from HR to Marketing directors, from City firms to those running charities. 

The moral arguments may well still apply but where salaries are less stellar, there may be more for an individual to lose on a relative basis and thornier issues to weigh on a practical level.

Here are some of the considerations that spring to mind:

  • Can you afford a cut in light of other family financial circumstances?
  • Would the voluntary pay cut be for a temporary period only or is it open-ended? If the latter there may be ramifications if you are ultimately let go. You would doubtless want any  redundancy compensation to be on the basis of pre cut pay.
  • Is the reduced pay to be reflected in adjusted hours of work?
  • Is the pay cut to monthly salary only or would it impact other benefits such as pension contributions, holiday allowance and commission or bonus arrangements?
  • What are the tax implications of the cut ? (And, of course, for high earners paying less tax will in fact mean reduced receipts to the Government which is the argument made on behalf of footballers).
  • There is also a question of fairness, of how far others in the organisation are being asked to share the pain and whether the reduction levels are reasonable or in line with peer companies.
  • Finally there is the issue of what is being done with the salary saved - how is this being rationalised? Is it to be put towards your employer's donation to the NHS or a.n.other worthy charity or is this a vital measure actually to help ensure the longer term viability of the business and to protect jobs for the many?  

Some of the City firms (eg HSBC) have pledged to halt redundancies during 2020, others have asked on an indiscriminate basis for voluntary pay cuts (eg Grant Thornton) in return for reduced hours, some in my experience are calling on senior managers to 'do the right thing' and take the strain compared to lesser paid support and other staff.

Each business and every professional will have a different set of factors to consider.  Sharing the pain has many dimensions to it and senior executives will need to weigh wider societal, organisational,  as well as personal factors in making their decision.

About the author

Corinne is an immensely experienced and highly respected employment lawyer. She advises both employers and senior executives in relation to the full spectrum of employment-related issues. She particularly enjoys dealing with equal opportunities-related issues in the workplace and acting in relation to (often hard-fought) whistleblowing claims.

 

Further information

If you would like any further information or advice about the issues explored in this blog, please contact Corinne Aldridge or another member of our employment team.

 

 

Latest blogs & news

Your employment rights if your Russia-related job is being cut

In recent weeks, we have all been witness to the significant consequences of Vladamir Putin’s invasion of Ukraine – on a human and business level. Many financial institutions have shut-down their offices in Moscow with staff being let go or transferred, and there has also been a ripple effect over here in the City with an impact on banking jobs in London.

Understanding the benefits of flexible working

Moira Campbell and Jess Rice explain how employers can use flexibility as a way to attract and retain talent and promote workplace inclusivity.

Coronavirus: Living with Covid – the implications for employers

The government made its long-awaited Freedom Day announcement on Monday 21 February 2022 and later the same day the Cabinet Office published its paper Living with Covid. As a result, the legal landscape for employers and employees changed significantly on 24 February 2022. The legal requirement to self-isolate following a positive test was removed. Self-isolation support payments went too. From 24 March, the special provisions for the payment of statutory sick pay for people with Covid-19 will be removed. So is this all good news for employers? Will this help those who have been charged with managing their workplaces through what remains of the pandemic? Does it mean freedom for them, or something less?

LLP Partners – Secure in the Equity?

The default retirement age of 65 for employees is now only a distant memory, but mandatory retirement ages for LLP members remain common in professional services firms. In practice this can result in surprising and harsh outcomes.

Removing vaccination as a condition of employment

Health secretary Sajid Javid has announced that the government will launch a consultation on removing vaccination as a condition of employment in health and all social care settings. The regulations requiring front line health workers to be vaccinated against Covid-19 (Coronavirus) as a condition of employment were due to come into force on 1 April 2022, which meant that unvaccinated staff had until 3 February 2022 to receive their first dose so that they could be fully vaccinated by April.

Whistleblowing in the UK: In Summary

UK law has granted protection for those who raise concerns of potential wrongdoing in the workplace (whistleblowers) since 1999 through the Public Interest Disclosure Act 1998.

Recent tribunal cases involving Covid-19

Nick Ralph looks in detail at recent cases that have stemmed from the pandemic, including a refusal to attend work due to fear of contracting the virus.

Covid vaccination and the workplace – what you need to know

One of the most topical issues regarding Covid-19 is that of vaccination and whether it should be mandatory. 

Stories regarding big employers such as Citibank in the US mandating vaccination as a condition of employment (“no jab, no job”), the experience of great sports personalities such as Novak Djokovic and the decision of the Supreme Court in the US last week regarding laws mandating vaccination in the private sector, have all brought this issue into the spotlight.

So what is the legal position in the UK?  

How HR should prepare for a workplace investigation

Richard Fox and Clodagh Hogan explain the questions people professionals should ask prior to conducting an inquiry into a dispute between employees

Investigations being conducted into workplace disputes have increased recently, possibly partly due to the rise in the number of sexual misconduct in the workplace allegations since the advent of the #MeToo movement.

Planning is key to workplace investigations and, if you are considering carrying out an investigation, ask yourself the following questions at the outset:

Flexible working – fit for firms?

Much has been said about the proposed changes to the flexible working regime announced by the Government in its Consultation Paper on 23 September 2021.

Omicron is here. What does that mean for employers?

It is the cliché that keeps on giving.  Uncertainty remains the only certainty in this world of coronavirus and all its mutations.

At the time of writing, the number of cases in the UK of the new coronavirus variant, Omicron (technically, the B.1.1.529 variant), had reached 32.  This is likely to increase given the current view among scientists that Omicron may be more infectious than the existing Delta variant of coronavirus and vaccinations less effective against it.

How businesses can avoid misusing NDAs

Richard Fox and Georgia Roberts explain why employers dealing with sexual misconduct claims should tread carefully when requiring an NDA to be included in a settlement agreement

Improving diversity at the top

The Financial Conduct Authority (FCA) recently launched a consultation on proposed amendments to its Listing Rules aimed at improving diversity and inclusion on company boards and executive committees. In particular, they are seeking feedback on proposals to require listed companies to publicly disclose annually whether they meet specific board diversity targets, including in relation to ethnicity, and to publish the composition of their boards and most senior level of executive management. To understand why such proposals are necessary, it is important to consider the current state of ethnic minority representation in UK leadership, why diversity at senior levels is so vitally important and what steps can employers take to improve diversity.

The UK’s Data Protection Reform Consultation – Good News for Employers?

On 10 September 2021 the UK Government launched a Consultation on proposed changes to data protection law with the aim to “create a more pro-growth and pro-innovation data regime, whilst maintaining the UK’s world-leading data protection standards”. The proposals are designed to build on the UK’s existing data protection regime (contained in the General Data Protection Regulation (as it applies in the UK post-Brexit) (UK GDPR) and the Data Protection Act 2018).

The Home Office’s new “early ILR concession”

Progressive developments in immigration law have become a rare phenomenon, so the Home Office’s new policy – which halves the route to settlement for certain young people who have resided in the UK for more than half of their lives – is welcome news.

BEIS White Paper on Audit Reform: Will Kwarteng's reforms really unchain entrepreneurs?

In 2012, as a recently elected MP, Kwasi Kwarteng co-authored “Britannia Unchained: Global Lessons for Growth and Properity”, a political pamphlet which championed risk-taking and innovation in the UK economy, and which ever since has led some to label him a fervent Brexiteer. Appointed as the Business Secretary in January 2021, only a few months later his department (BEIS) published one of the longest and most ambitious government White Papers in recent years.

Barder: Exceptional and rare

Cate Maguire looks at how the Barder principle has been applied in cases involving 'known unknowns'

World Menopause Day - time to break the taboo!

World Menopause Day was held on 18 October 2021. It is an opportunity to break the stigma and taboo that still exists around menopause and to encourage open dialogue about what is a natural and very significant transition in a woman’s life.

Redundancy and negotiating an exit package during the pandemic

Coronavirus is having a serious impact on businesses and the global economy. Sadly, many businesses have been impacted to the extent that they have or will have to put cost-cutting measures in place. For some individuals this will result in their role being put at risk of redundancy.

Preparation for Public Inquiries - Webinar Summary

In light of the announcement that an independent inquiry into the Government’s handling of the coronavirus pandemic will begin in spring 2022, Kingsley Napley hosted a webinar last week on the theme of Preparing for Public Inquiries in conjunction with Blackstone Chambers and FTI Consulting. For anyone who missed this event, a recording is available here (LINK) and we have also prepared the summary below.  

COVID-19 related insights:

COVID-19 related insights:

Our COVID-19 statement

We recognise that these unique times are presenting unprecedented challenges for our clients and we are here to support you in any way we can.

Click to view

Can you get out of or suspend a contract because of Coronavirus?

Alex Torpey covers the key things to look out for if you are relying on the Force Majeure clause.

Watch the video on LinkedIn

Overcoming the challenges of co-parenting for separated and divorced parents

Rachel Freeman, Partner in our Family Law team, addresses some issues that we are seeing arise for separated parents in the current crisis.

Read the blog

Tech in Two Minutes - Episode 7 - The Coronavirus challenge for tech coworking spaces

Andrew Solomon speaks about the challenge for tech companies and coworking spaces during the current COVID-19 pandemic.

Listen to the podcast

The legal basis for lockdown

Alun Milford, Partner in our Criminal Litigation team, provides an in-depth look at the legal basis behind the current lockdown.

Read the blog

Managing your Migrant workforce in the COVID-19 crisis

On Friday 3 April, immigration partner and head of department, Nick Rollason, hosted a webinar looking at urgent issues employers are facing during the COVID-19 crisis and answered some of the key questions being raised.

Watch the webinar recording

Furlough leave and the Coronavirus Job Retention Scheme: key legal considerations for Employers

On Thursday 9 April, Andreas White, Partner in our Employment Law Team, delivered an overview of the scheme with a focus of the key legal issues for UK employers.

Watch the webinar recording

Coronavirus and the perils of signing your Will

Will instructions have apparently risen by 30% since COVID-19 reached our shores. What effect does COVID-19 have on Will signings? James Ward and Diva Shah in our Private Client team blog.

Read the blog

The juggling act of a single mother, home school teacher and head of a family team

Charlotte Bradley, Head of our Family Law Team, reflects on how the COVID-19 crisis has affected working parents like her.

Read the blog

The future public inquiry into COVID-19

Calls for a public inquiry are continuing to mount and are likely to prove difficult to resist. In this blog, Sophie Kemp considers the framework for such inquiries, and the key issues likely to form the core of its terms of reference.

Read the blog

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Skip to content Home About Us Insights Services Contact Accessibility