Benefits Surgery: Employment contracts

Q Does the introduction of pay freezes and/or a decision to reduce the working week to four days require employees’ consent?

A Employment contracts often state that the employer will conduct a periodic salary review at its complete discretion, with no obligation on the employer to agree to an increase. As such, most employees are not contractually entitled to regular pay increases. Pay freezes, while unpopular, are therefore unlikely to constitute a variation to employees’ contracts of employment and employers will be entitled to introduce such measures as, and when, they want, for as long as they want.

The decision to reduce the workforce’s working week to four days does constitute a variation of the employees’ contracts of employment. It is unlawful for an employer to vary an employee’s contract without the employee’s consent, and so, before introducing a four-day week, the employer will have to have a period of consultation with the workforce about the proposed change. If there is a genuine diminished requirement within the business for employees to continue to do the type of work they are employed to do, an employer may be able to force through such a change, on the basis that a redundancy situation has arisen and that, without taking such a measure, a reduction in the workforce would be unavoidable.

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With the market stagnant and increasingly flooded with people looking for work, few employees are likely to balk at a pay freeze or a reduction in hours, and will simply be grateful that they still have a job.

Rebecca McManus, associate in the London employment team at Hogan and Hartson