I’ve been asked to take a pay cut, should I agree?

I’m a senior executive working in management consultancy and have been asked to take a 10 per cent pay cut. My employer has not said it is temporary, just that it will be reviewed in three months. They have said that if we don’t take pay cuts, redundancies would be on the cards for a number of employees. Should I agree and what are the considerations?

Meriel Schindler, head of the employment law team at Withers, says that sadly you are among the very many people in the UK being asked to accept a pay cut in the current climate, but you are not entirely at your employer’s mercy and should consider some options.

If you accept a cut it will involve a formal variation of your contract. I have not seen your contract, however, your employer is likely to need your written agreement to a variation involving anything as significant as a pay cut.

Before accepting a pay cut you should explore whether all of your peer group and those senior to you are also being asked to take an equivalent cut. You could also seek to negotiate the level of pay cut. Would your employer be content with, say a 5 per cent rather than a 10 per cent cut?

If you refuse to take a pay cut then your employer either has the choice of backing down or, as threatened, making you redundant.

Meriel Schindler, head of the employment law team at Withers © Handout

If you have been employed for more than two years then your employer will need to follow a fair process and in particular select you fairly for redundancy or risk falling foul of unfair dismissal law. If your employer is strapped for cash they may only pay you statutory redundancy and your notice period. If you have been employed for less than two years then you are somewhat under protected and your employer is likely to exit you by simply paying you your notice pay.

However, there are steps you can take and there may even be advantages to be secured in this situation. The advantage of agreeing to a pay cut is that you retain your job at a time when it may be difficult to get out and look for a job. If you are contemplating accepting a cut, I would also try and agree an automatic reinstatement of your previous salary after three months rather than simply “a review”.

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