Can your employer enforce a salary cut?

As a matter of fact, an employer can not easily enforce such a measure. This is mainly because of the general rule:

Salary is a "primary performance" of an employer that can be set against the "primary performance" of an employee to work. Furthermore, salary is essential in supporting oneself and an employee obviously has a substantial interest in his salary remaining unaltered.

A recent case

A short time ago, a judge was asked to agree with an employer’s proposal to cut his employees’ salary by 10 per cent. The employer stated that all employees had to agree to this decrease in their salary in order to prevent the company’s insolvency.

Most of the employees (69 per cent) had agreed to the proposal, as had the works counsel. One of the employees, however, undertook legal proceedings in order to maintain the full salary. The judge agreed with the employee.

The judge sympathised with the employer as regards the company’s difficult financial situation, but his ruling was that the proposal was not reasonable. The employee could not reasonably be asked to accept a salary cut of 10 per cent.

A unilateral changes clause

The conclusion is that even though a works counsel and two-thirds of the employees of this company were prepared to accept the 10 per cent salary decrease, the employer could not force all his employees to do so.

Such a salary cut is not a reasonable proposal, which means that the employer cannot expect an employee to agree to such a proposal. The judge even added that if the employer had had a unilateral changes clause, the outcome would have been the same.

What must an employee accept?

In general, employment conditions cannot be changed without first obtaining the consent of employees.

In cases where an employer does not have a clause in the employment contract stating that it can unilaterally change employment conditions, it will need to demonstrate a substantial business interest.

Even then an employer will still need to prove that, on the grounds of reasonableness and fairness, employees cannot be expected to agree with modifications of their employment contract.

Tip

Even if your employer’s financial position isn’t sound, do not conclude too easily that your employer can ask you to accept less salary.

Not only does your employer need to have a substantial business interest in doing so, the proposal must also be reasonable.

A salary cut is not usually found reasonable, whereas a change in a car lease agreement, for example, may be decided differently.