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Can I change remote workers’ pay?

Written by Suzanne Wrench on 1 December 2021

According to our Mind the Gap survey, less than half (40%) of employees are confident that home and office workers will be treated evenly and fairly in respect to pay and reward in the next 12 months. What’s more, business leaders themselves are only slightly more optimistic about their ability to ensure fairness, at just 54%.

A hybrid working environment may lend itself to redefining traditional pay and rewards, or even a new pay structure to take account of new working arrangements. Indeed, as you consider what your organisation needs to be in order to thrive in a post-pandemic marketplace, you will no doubt consider things like where people will work, how you will be structured, and how many employees you will need in the future. The answers to these questions will have a significant impact on all aspects of pay.

It may therefore be a good time to reassess whether the traditional approach to paying people is still viable. But how do you ensure fairness and avoid legal issues?

Here are some things to think about.

Localised compensation

As more people move away from high-cost urban areas where their employer is located, some organisations are planning to offer remote employees localised compensation commensurate with a lower cost of living.

There are a few options here. You could:

  • Set pay rates by your main office location or regional offices, with employees assigned to specific pay structures based on the office closest to their remote-work location.
  • Set pay based on the employee’s home or remote-work location. If an employee or job candidate lives in an above-average rate-of-pay labour market, you may need to account for the employee’s salary expectations based on local pay expectations.
  • Set employee pay to the national level for all

The alternative is to maintain the more traditional approach of paying based on an employee’s skills and the ‘size’ of the job (as determined by a job evaluation).

Each of these options have merits in their own rights and it may be that you need a combined approach when you are considering what’s best for your own organisation. There is no right or wrong approach here and it may be that your current way of setting pay remains fit for purpose. 

Whichever approach you choose to take, make sure that you have thought carefully about your strategy and take professional Employment Law and HR advice to manage any impact on employees.

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Reducing pay for remote workers

Pay is a fundamental contractual term of the employment relationship. Such terms cannot be changed unilaterally, without consent or consultation.

While it’s possible that an employee might consent to have their salary reduced to secure a permanent homeworking position – in fact, a recent poll revealed that a third of UK workers (35%) would be willing to accept a pay cut in exchange for permanent remote working – it’s unlikely that everyone will agree to this.

This presents practical issues for employers. Unanimous agreement among all affected staff is desirable to ensure a consistent approach is adopted, but employers will be less likely to achieve this if a large number of employees are involved.

The fair way to change employees' pay

If changing pay is on your agenda, it’s essential to maintain the concept of fairness by following the correct legal process.

Employers should always aim to obtain consent first. If you are unable to get employees to agree to the pay changes, you will need to consider whether you wish to unilaterally change employees’ contracts. For employees with two years’ service or more, this can only be done in certain limited circumstances, and usually only when there’s an urgent business need.

In order to justify any reduction in pay for remote workers, for example, you will need a compelling business case detailing why this was absolutely necessary and why no alternative options could be implemented. This may be a difficult task for the employer to achieve; for example, if you’re saving money on office space due to an increase in hybrid working arrangements, why do you need to save on costs?

Employers should discuss their circumstances with an Employment Law professional to establish if a legal basis for this action can be found.

This process of forcing through pay changes most commonly involves the employer giving notice to end the contract and then offering to re-engage the employee on new terms – so-called ‘fire and rehire’.

The danger here is that ending one contract in order for a new one to be issued involves a dismissal. As such, employees with more than two years’ service will be able to claim unfair dismissal – irrespective of whether or not they accept the new terms – and could also resign and claim constructive dismissal.

For this reason, fire and rehire tactics are not without risk, and employers should consider every alternative first to avoid complaints of unfairness. Indeed, while the government responded earlier this year to confirm that it will not legislate to prevent fire and rehire situations, it did describe the practice as “immoral”. As such, employers should consider every alternative first to avoid complaints of unfairness.

In the case of employees with less than two years’ service, employers can change contacts without creating the risk of an unfair dismissal claim being made. However, this isn’t the only risk, and employers must also be alert to potential discrimination issues, as well as other employee relations problems.

Discrimination risks

Adopting a policy that disproportionately affects staff who share a protected characteristic may give rise to discrimination claims.

For example, one of the benefits of remote working is that it particularly assists certain groups, such as women, who, as a group, tend to bear the majority of childcare responsibilities. The ability to work from home (without a lengthy commute) and still be able to do the school drop-off and pick-up means that there is a generation of women who will be able to access a variety of jobs that would never have been available before.

So, if you implement a policy to reduce pay for those working from home only, this is likely to indirectly affect more women than men and could lead to indirect sex discrimination claims. Such claims can only be justified if the policy is a proportionate means of achieving a legitimate aim.

With this in mind, changing pay for remote workers may also lead to equal pay considerations. If more women work from home than men, but those women are paid less than men for doing the same job, there may be potential for equal pay claims. Employers could only defend such claims if they can prove that the reason for the pay disparity is not sex but rather another material factor, in this case employees’ location.

Conclusion

Ultimately, pay and reward can be redefined in the world of hybrid work – and perhaps ought to be – but it will need to be addressed extremely carefully.

As well as the legal risks mentioned above, the reality is that, for most people at least, money is the primary motivator for going to work. Therefore, any action that has the effect of reducing employees’ earning capability will most likely not be well received.

Staff might begrudgingly come into work despite pay changes, but their performance and attitude may be affected by a policy they deem to be unfair.

Cutting pay for remote workers may also give rise to the perception that they are less valued than their site-based colleagues, which may give rise to resentment. The question is, can you afford such repercussions?

Make changes fairly and compliantly with specialist support

Any fundamental change to how employees work is likely to have contractual implications. It’s therefore safest to seek support from legal and HR specialists.

Whether you’re looking to shake-up your pay structures or introduce new ways of working, WorkNest assigns dedicated experts to help you execute your plans efficiently and compliantly, minimising the potential for legal issues and employee relations disasters. We’ll advise and guide you through the steps you need to take, as well as take care of any new or amended documentation that might be required along the way.

For more information, call 0345 226 8393 or request your free consultation using the button below.

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