What happens if employees refuse pay cut

ney001

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Hi quick question on behalf of a friend. She owns a small business, approx 7 employees I think. Friend has realised that in order to survive everybody including herself will have to take a paycut. She called a meeting and informed everybody of her plans, giving them a few weeks notice of cut. They all came back in the next day and refused to take the cut. Question is, what happens now, in a few weeks she literally won't be able to pay the full wages for everybody. Can she go ahead with pay cut anyway?, What i am wondering is, what happens next. Suppose the employees refuse to work altogether, what rights does my friend have?. There is no union involvement.
 
To be honest, she's that annoyed she feels like letting them all go and hiring new staff but to be honest, she wants to keep everybody on (with the exception of one who she is letting go for other reasons) hence the pay cut. Q is can you let everybody go because they won't take pay cut and then immediately hire new people for same positions?
 
I think your friend has badly mishandled the situation and is encountering difficulties which she has caused. She simply cannot 'round-up' the staff and give notice of a pay cut, it doesn't work like that.
There is a contract (written or not) between the company and each staff member which specifies the rate of pay, if she wishes to change that contract, then it must be by agreement or else she has broken the contract.
Its natural the staff would refuse the pay cut, if the communication was as blunt as you describe.
Your friend will now have to try and recover the situation and use a bit of common sense, communicate openly and directly, explain the company situation and earn some good-will back.
If your friend can't afford to pay wages, then redundancy must commence immediatly, does your friend know how to do this? There are strict procedures, she needs to be aware of them.
The question regarding letting everyone go and hiring new people is absurd, what will that solve? The new staff will just react the same way as the old staff when they discover what a bad boss she is.
Your friend needs to get real, get some training in employment law and do it fast!
 
I think your friend has badly mishandled the situation and is encountering difficulties which she has caused. She simply cannot 'round-up' the staff and give notice of a pay cut, it doesn't work like that.
There is a contract (written or not) between the company and each staff member which specifies the rate of pay, if she wishes to change that contract, then it must be by agreement or else she has broken the contract.
Its natural the staff would refuse the pay cut, if the communication was as blunt as you describe.
Your friend will now have to try and recover the situation and use a bit of common sense, communicate openly and directly, explain the company situation and earn some good-will back.
If your friend can't afford to pay wages, then redundancy must commence immediatly, does your friend know how to do this? There are strict procedures, she needs to be aware of them.
The question regarding letting everyone go and hiring new people is absurd, what will that solve? The new staff will just react the same way as the old staff when they discover what a bad boss she is.
Your friend needs to get real, get some training in employment law and do it fast!


Less drama more constructive opinions please!

Okay, just to clarify. I put in a shortened version of events here. Actually they were put on notice months ago i.e before Christmas that pay cuts may be initiated early in the new year, there was no issues raised at this stage. I should also point out that the employees are on a very high rate for the industry they are in, friend always paid higher rate to ensure loyalty I guess. Also, I must also add that out of the 7 employees, only 5 have been asked to take pay cuts, the reason for this is that the other two have young families, the other five individuals concerned are all single - now perhaps this is where the problem lies, I don't know!

To assume that she is a bad boss is some leap based on my post! I have always felt that she has been extremely fair and always played by the rules. The hiring of new staff will not be a problem as she receives CVS every single day from high qualified people who would be very glad of the rates that she is paying so quite frankly it doesn't sound absurd to me. My friend does not have a high turnover of staff and never did, the staff have always been happy with their jobs and the fairness with which they have been treated which is why almost all of them have been with her for a long time.
 
It is a very delicate situation.

She cannot force pay cuts, but she needs to explain the consequences of the staff not accepting the cuts. This is usually redundancies or the closure of the business.

I would be very careful of selecting certain staff over others for the cuts, no matter how good the reasons.

She cannot let people go and then hire new staff at reduced rates. She would be open to unfair dismissal charges.

The best approach is to be completely up front with the staff, even to the point of giving some financial information from the latest accounts to back up the points.

It is then up to the staff to make their own judgement as to their best course of action.
 
. If she "feels like letting them all go" based on the reasons you have given, she might want to read up on employment law and find out how much trouble she could be in if she doesn't play by the rules.

If you read the rest of that sentence (in context) you would see that she wants to keep them all on!

What I was trying to put forth was that she is very irritated and worried by all of this and is doing the best she can to keep everybody in employment, rather then having to let some go and keep on others.

My point here lads which I think you are missing is that she WANTS to play by the rules, she WANTS to keep the staff on but she NEEDS to give them a pay cut. You all seem to be assuming that she is looking for a handy way out of all of this - that is NOT the case, the question is, how to push forward and keep everybody working.

Staff were informed that paycuts may have to be given, it wasn't a definite at the time, it was basically a worst case scenario which was explained to staff & as I said there were no problems then.

I do agree about the pay cut to 5 out of 7 being unfair, this was purely based on the facts that those two staff members (more senior staff) have young families.
 
in fairness, people can only comment on what you put in your original post, so where you baldly stated 'she called a meeting' would imply to most reasonable people that it came out of the blue, you have since clarified the position but if you'd done that originally it would have been better.

i think what she should do is make plain that the cut is across the board, if she's paying people a very high salary (above industry norms) then it should be acceptable to the staff. treating people differently based on marital status could see her in trouble on equality grounds, she really needs to tread carefully here.
 
The best approach is to be completely up front with the staff, even to the point of giving some financial information from the latest accounts to back up the points.

It is then up to the staff to make their own judgement as to their best course of action.


Hi Callybags, financial situation was explained to them by the accountant in a bid to mediate.

At the moment, there is a stand-off staff won't take pay cut, paycut has to be given - what to do next??
 
Not knowing the business it is very hard to advise any further.

If any of the staff can be let go without being replaced, then this is one option.

If things are that critical, and the business cannot be run with a reduction in the numbers, then closure of the business is a real possibility unless the necessary cuts can be found elsewhere.

This stark reality needs to be made clear to the staff.
 
Not knowing the business it is very hard to advise any further.

If any of the staff can be let go without being replaced, then this is one option.

If things are that critical, and the business cannot be run with a reduction in the numbers, then closure of the business is a real possibility unless the necessary cuts can be found elsewhere.

This stark reality needs to be made clear to the staff.

I don't want to go into the details of the business but will confirm that the reality of the closure of the business has been made very clear. She will be letting one employee go and will not be re hiring for that position. Things are quite critical at the moment agreed and she is taking advice on what to do next. My query is just a general query which might point her in the right direction. i.e people who have actually experienced this and how they managed. The suggestions of reading up on employment law is something which of course in an ideal world would happen but quite frankly she is fighting to save a business and doesn't have the time to sit down and study (presumably why she is taking advice) - As I said I was hoping for advice of a general 'experience based' nature.
 
Can your friend contact IBEC or a local chamber of commerce to assist her with the legalities of what she needs to do.

Dont worry about the employees - there were redundancies where I work over a year ago and no it wasn't handled brilliantly - but the owners of the company were apolagetic and they did explain that foor them this was unfortunatly a very new experience for them...
 
Can your friend contact IBEC or a local chamber of commerce to assist her with the legalities of what she needs to do.

Dont worry about the employees - there were redundancies where I work over a year ago and no it wasn't handled brilliantly - but the owners of the company were apolagetic and they did explain that foor them this was unfortunatly a very new experience for them...

Thanks PBear I guess that's the problem here, she has been in business for a very long time but has never been faced with having to reduce pay before. Will recommend the IBEC route
cheers
 
Hi there,
A friend of mine is also a member of a group in Fingal - called Women in Business. She has found it helpful in the past - that is if your friend is located in North county Dublin...

[broken link removed]
 
If the employees won't accept a paycut and the business needs cuts to survive, then the company must find the cost savings elsewhere. Therefore, OP's friend must consider redundancies and, if so, should do them properly and within the law - this is not just a moral question but she protects herself against further claims if the redundancies are carried out properly. As well as the advice offered elsewhere on the thread, there's a heap of free information on the NERA and Citizen's information sites about selection criteria, redundancy notice, pay etc.

OP, you say your friend is "seeking advice" - does that mean she's gone to a solicitor? Obviously, that would be the preferred route to ensure legal compliance in the event of redundancies.

She needs to get over her pique and start dealing with how to cut costs and meet the option of redundancy head on.

There are a few immutables:
- she can't reduce pay without the employees' agreement
- she can't let them all go and hire them back for lower salaries without running the risk of them claiming that the initial termination was an unfair dismissal

The fact that she was only expecting single people to take a pay cut is, to my mind, appalling. It's not illegal per se (she can single out whoever she wants to ask to take a pay cut, and they can say no). If she makes redundancy selections based on family (or lack thereof) grounds or suchlike, that would invite a pretty clear-cut claim for unfair dismissal/unfair selection.

If she doesn't have the knowledge/experience to tackle redundancies herself and doesn't have the time to bone up (both understandable), then she needs to get in contact with an actual advisor (HR or Legal) to guide her through this process. If her knowledge of redudancies and the processes involved is limited now, then I'd advise against relying on free information to do it properly (although she should read all the information available so that she's informed to the best extent she can be). Unfortunately, that means she's going to have to consider spending money to save money, but I think that's probably better than selecting people for redundancy and then finding herself on the wrong end of an employment claim.
 
Also, I must also add that out of the 7 employees, only 5 have been asked to take pay cuts, the reason for this is that the other two have young families, the other five individuals concerned are all single - now perhaps this is where the problem lies, I don't know!

To assume that she is a bad boss is some leap based on my post! I have always felt that she has been extremely fair and always played by the rules.
She has displayed complete ignorance of Equality legislation with her approach above. She has discriminated against the single individuals on grounds of their family status. This may well cost her dearly.
 
She needs to have a clear plan of action.
Her two options are across the board pay cuts (she should take a bigger cut than her employees but she should not discuss her salary level or her personal financial circumstances) or redundancies.
I agree with other posters that she has handled the situation badly (even if she meant well) but the bigger picture is the survival of the business and by extension the jobs of her employees. In that context the stance taken by her employees (I’m not doing what needs to be done because you hurt my feelings) is remarkably stupid.
Considering the loyalty she has shown to them in her position I would be very peeved.

So, I would suggest that she reads up on employment law (relative to this matter only). This can be done on Citizens advice or here on the relevant forums. I would then apologise to the staff about how things were communicated but restate very clearly that the material facts hadn’t changed and that if they didn’t agree to pay cuts the business would be closing within weeks.
 
I do agree about the pay cut to 5 out of 7 being unfair, this was purely based on the facts that those two staff members (more senior staff) have young families.


I would have a fit if my employer asked me to take a pay cut on the basis that I didn't have kids.
 
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