Can you reduce an employee’s wages because they work from home?

According to a recent survey of 1,000 employers by the Chartered Institute of Personnel and Development (CIPD), one in ten employers plan to reduce the pay or benefits of workers who choose to work from home rather than return to the office.  

You may, perhaps, find these results surprising or you may think that these employers have the right idea.   Whatever your view, proposing to cut the pay of staff is never something that should be done lightly and without careful consideration.

Why, you may ask, are some employers proposing to take this action?

The reasoning appears to be that those who are not commuting to work are incurring lower costs and therefore their wages should be reduced to reflect this.  However, critics have argued that, whilst employees may well save some costs in not having to travel to and from work every day, the cost of living has risen exponentially.  Therefore, the argument is, to reduce wages for home workers at a time when finances may already be tight, is unethical and likely to create bad feeling in the workplace.

As with any decision that is going to have a significant impact, employers have to consider the pros and cons carefully. 

The first port of call must always be the employee’s contract – does the contract allow you to reduce the employee’s salary on the basis that that they are no longer incurring the expense of commuting to and from work?   The answer will almost certainly be “no”.    Where the contract does not allow the change, you must obtain the employee’s express agreement to it which, of course, leads to difficulties as it is unlikely that an employee will agree a reduction in salary, particularly where they may financially be no better off working from home than in the office.

A distinction does need to be drawn between employees who ask to work full time from home and those who are required to work from home by their employer.  

Where the employee wants to be home based but their contractual place of work is the office, the employee must obtain the consent of their employer. It is open for an employer in those circumstances, to make their agreement to home-based working conditional on the employee receiving less pay.  In fact, earlier this year, after experiencing difficulties encouraging staff back into the office at lockdown, London law firm (ahem!), Stephenson Harwood, told staff that they could work from home full time provided they agreed to a 20 per cent pay cut.  

Where the employer requires the employee to work from home instead of the place of business (e.g. because of an office closure) however, the employer is going to struggle to justify cutting wages of staff because the decision to work from home was not theirs.

It is also a fact that working from home does come at a cost.   Energy prices, as we know, are at an all-time high.   There is also the cost of installing broadband which can cost a pretty penny, particularly if you need high speed broadband.  

Is it right, you may ask, to reduce pay because employees are not incurring commuting costs when there are still costs associated with working from home?

Generally speaking, an employer who seeks to justify the reduction of pay or benefits of home-based staff on the basis of the perceived savings to the employee is going to have difficulty persuading them to agree to such a change.  

Perhaps it is worth digging deeper into why some employers feel the need to reduce pay or benefits because employees are working from home.  What is the real issue that employers are trying to address here – fear of lack of productivity or a genuine need to reduce costs?  During lockdown, many employees spent the time that would otherwise be spent commuting to and from work, at their desks working, meaning employers were getting more work from their workforce, not less.  Of course, there will always be employees who do not have the right work ethic, but you are just as likely to have such employees working in the office as you are working from home.  I would argue that productivity can be measured in most jobs remotely and lack of productivity can be dealt with in the same way with a home-based job as in an office-based job.    Arguments based on productivity therefore, in my opinion, do not stand up to scrutiny. 

If the aim of reducing pay or benefits of home-based employees is due to a genuine need to cut costs, in most cases, the situation can be resolved through agreement with the individual employee. 

Most employees are willing to compromise in return for the convenience and flexibility of working from home, and if necessary to avoid redundancies.

Disproportionate impact on women?

Last but by no means least, is the concern that by reducing the pay or benefits of workers who work from home (whether by agreement or other means) this will have a disproportionate impact on women in the workplace.  

Women, statistically, continue to bear the greater responsibility for childcare and therefore it follows that working from home is a more attractive proposition for such women as it offers more flexibility in terms of working around childcare commitments.  

Is there not a danger that by reducing the pay or benefits of those who work from home, employers will end up penalising female employees because they are more likely to want to work from home than their male counterparts?   And what about the law of equal pay which says that men and women are entitled to equal pay for the same work or work of equal value?  Is there not an argument to say that a female employee who works from home is entitled to be paid the same as an office based male employee who performs the same work or work of equal value?   Many would argue that there is a material difference between an employee who works from home and an employee who works from the office and therefore you cannot make that comparison.   Others, however, say that it makes no difference where the work is carried out – if the work is the same or of the same value, the pay should be the same. 

With reports that women are finding it increasingly difficult to return to the workplace after having children due to childcare costs, moves to reduce the pay or benefits of home-based workers will surely disincentivise women further from returning to work.  This does not further the pursuit of equality in the workplace nor is it good for the economy.   Also, valuable skills will be lost if women are not encouraged to return to work after having children.  I can’t help but think that employers who plan to reduce pay and benefits of home workers will lose out in the long run.

What do you think?  Do you think it is right that some employers are planning to reduce pay and benefits of permanent home workers? I would be interested to know your thoughts.