Should employees working from home take a pay cut?

According to the Mail on Sunday, a cabinet minister recently suggested that civil servants who were now working from home should take a pay cut, due to their reduced commuting costs.

According to the source, to maintain homeworking employees on the same pay as their office-based colleagues amounted to an unfair pay rise.

Before employers jump on this suggested method of reducing employment costs, however, there is a whole raft of employment law implications that need to be considered:

1. Potential breach of contract / unlawful deduction from wages

An employee’s rate of pay is an explicit term of an employee’s contract. To reduce the employee’s pay without the employee’s agreement could potentially amount to a breach of contract and an unlawful deduction from wages. Any proposal to change terms and conditions of employment is likely to require consultation with the employees affected, with a view to reaching an agreement.

2. Potential indirect discrimination

• If the organisation finds that more employees of one gender than another have chosen to work from home, the pay cut could amount to a provision, criterion or practice (PCP) which puts the relevant gender group at a disadvantage. A PCP is something which, although it applies to most or all of the workforce, puts one group at a disadvantage based on a protected characteristic such as sex.
• If employees with a serious medical condition are concerned about returning to the workplace because of health concerns in relation to covid, an insistence that they do so or face a pay cut could amount to discrimination on the grounds of disability.

3. Perception of unfairness

Employers could choose to apply the rule for new employees and leave existing staff on their current pay levels. However, if the new homeworking employees are placed at a disadvantage compared with longer-serving colleagues, this could seriously damage employee morale and create an ‘us and them’ culture. In addition, there is a further risk of indirect discrimination based on age, if the new employee group can show that they tend to be younger on average than the longer-serving workforce.

4. Unforeseen consequences

If the employer decides to argue that a need to commute justifies higher pay, how long before employees with the longest commute start arguing that they should have an even higher rate of pay than those with a shorter commute? Employers should focus on the value they receive for the salary paid – what is the business benefit of financially rewarding someone for choosing to commute?

5. Travel allowance

If employers do decide to go down the differential pay route despite the issues raised above, they may wish to consider offering a travel allowance, which is explicitly linked to the need to commute, rather than increasing salary. This gives employers the flexibility to remove the allowance if the employee subsequently requests to work from home on a permanent basis.

The imposition of working from home due to covid accelerated the debate on improving work/life balance and the practicality of some roles being capable of being done from home. While working from home is impractical and/or undesirable for some, there is no doubt that millions of workers have greatly appreciated the new flexibility available to them. As we now start to move forward with fewer covid-related restrictions, those employers who can demonstrate a more flexible approach to where and when work is done may well have the competitive advantage going forward.

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