Can companies cut pay for staff who refuse to come into the office?

Fol­low­ing the lift­ing of Covid restric­tions, many com­pa­nies have grap­pled with the chal­lenge of encour­ag­ing work­ers back to the office. 

While some busi­ness­es have looked to intro­duce incen­tives to per­suade peo­ple back, Lon­don-based law firm Stephen­son Har­wood has tak­en a dif­fer­ent approach.

On 1 May, the com­pa­ny intro­duced a pol­i­cy which requires peo­ple to come into the office at least three days a week or face a 20% reduc­tion in salary. A spokesper­son for the com­pa­ny claims that the pol­i­cy “strikes the right bal­ance” by offer­ing some flex­i­bil­i­ty, while also cap­tur­ing the ben­e­fits of work­ing togeth­er in the office. 

Over the course of the pan­dem­ic, Stephen­son Har­wood began recruit­ing peo­ple from out­side Lon­don. Salary offers to these lawyers were low­er than those offered to peo­ple already liv­ing in Lon­don, to reflect the high­er costs of liv­ing in the cap­i­tal. This led to the firm’s deci­sion to offer the option to all employ­ees to work remote­ly full time, but for a salary sac­ri­fice.

While Stephen­son Har­wood claims that the pol­i­cy was intro­duced in the inter­ests of fair­ness, those on the receiv­ing end of a pay cut will like­ly feel dif­fer­ent­ly. One lawyer from the firm told legal news web­site Rol­lOn­Fri­day the pol­i­cy was “out of touch”, with anoth­er com­ment­ing that it was a “dis­grace­ful approach” that would dis­pro­por­tion­ate­ly impact women and work­ing par­ents.

Philip Richard­son, head of employ­ment law at Stephen­sons Solic­i­tors, says: “Many employ­ees feel just as pro­duc­tive, if not more so, than if they were com­mut­ing into the office every day. If their work and out­put is of a high qual­i­ty, some will view the deci­sion as harsh to penalise employ­ees sole­ly since where that work is done.”

An unlawful wage deduction?

There is also the poten­tial that intro­duc­ing dif­fer­ent wages for staff, based sole­ly on their loca­tion, could be chal­lenged as an unlaw­ful deduc­tion of wages, accord­ing to Slater and Gordon’s head of employ­ment law Jo Mack­ie. 

“Even if peo­ple are work­ing from home, they’re still expect­ed to do the same amount of work as before, so there’s no rea­son to cut their pay. It’s a way of coerc­ing peo­ple back to work and I would sug­gest that there’s a sig­nif­i­cant risk of an unlaw­ful deduc­tion of wages claims com­ing out of this.”

A deduc­tion in pay can be deemed unlaw­ful if it’s not autho­rised by leg­is­la­tion (such as income tax and nation­al insur­ance deduc­tions), if it’s not part of your con­tract of employ­ment or if the employ­ee has not pro­vid­ed writ­ten con­sent before it was tak­en. Acci­den­tal over­pay­ments or deduc­tion in pay for employ­ees who have par­tic­i­pat­ed in indus­tri­al action are some of the few excep­tions to the rule.

Mack­ie adds: “If your defence of the change is to say peo­ple aren’t work­ing effi­cient­ly from home, how can you prove that? And equal­ly, as a busi­ness, you have to ask your­self why peo­ple don’t want to come back in.”

Is it cheaper to work from home?

Some employ­ers have tried to make the case that home work­ers should receive less pay because of the sav­ings they’re able to make in com­muter fairs. Last year, an unnamed min­is­ter sug­gest­ed that civ­il ser­vants who were work­ing from home should be paid less as the fact they were no longer pay­ing com­mut­ing costs amount­ed to “a de fac­to pay rise” which was unfair on those that con­tin­ued to come into the work­place.

The idea was lat­er reject­ed by Busi­ness Sec­re­tary Kwasi Kwarteng.  

Cran­field School of Man­age­ment pro­fes­sor Emma Par­ry believes that such rea­son­ing is based on a false assump­tion. “The idea that it costs employ­ees less to work remote­ly is not nec­es­sar­i­ly the case giv­en dif­fer­ences in com­mutes and the ris­ing cost of ener­gy bills,” she says.

She adds that the deci­sion of Stephen­son Har­wood also shows that there is still too much empha­sis placed on where peo­ple work, rather than the val­ue of their con­tri­bu­tions. A 2020 sur­vey of US employ­ees found that home work­ers worked an addi­tion­al 1.4 days each month. Par­ry says: “The evi­dence sug­gests that employ­ees who are allowed to work in a way that suits them – includ­ing remote­ly – may be more engaged and pro­duc­tive.”

One com­pa­ny that has tak­en the oppo­site approach has been Airbnb. It recent­ly con­firmed that staff will be able to work from home or in the office and move to any loca­tion in their coun­try of work, with­out a change in com­pen­sa­tion. The com­pa­ny clar­i­fied that a “small num­ber of roles” will still be required to come into the office occa­sion­al­ly.

Airbnb CEO Bri­an Chesky said in a com­pa­ny-wide update that the deci­sion came off the back of the company’s “most pro­duc­tive two-year peri­od in our his­to­ry”. This suc­cess came even though offices were closed at the start of the pan­dem­ic and most staff were restrict­ed to work­ing from home.

With many busi­ness­es prov­ing that it’s pos­si­ble for staff to work effec­tive­ly from home, it only rais­es fur­ther ques­tions of why cer­tain employ­ers think home work­ers deserve a reduc­tion in salary. Par­ry warns: “Any move to pay them less could poten­tial­ly cre­ate fur­ther divi­sions with­in the work­force and lead to prob­lems in rela­tion to equi­ty and inclu­sion.”