This archive report was first published on 12 May 2020.
As the COVID-19 pandemic continues to affect businesses worldwide, many employers are exploring cost-cutting measures to stay afloat. One such measure is implementing pay cuts, which can have a significant impact on employees' livelihoods.
However, employees have rights that they can exercise if austerity measures entail a pay cut. According to the Employment Act, there is no provision for pay cuts, and any alteration to an employee's salary must be agreed upon by both parties.
On May 12, 2020, MWIKALI MUTHIANI wrote, 'It is prudent for employers to exhaust as many options as possible before resorting to redundancies.'
Employees who are approached with a pay cut request can choose to accept or decline. Declining the request means they do not want to be part of their employer's efforts to minimize costs and secure jobs, effectively making them redundant.
On the other hand, accepting a pay cut requires the employer to issue a written agreement stating the reduction, effective date, and anticipated date when regular salary will be restored. The employee must acknowledge and accept the changes for this to be binding.
Once a pay cut is implemented, it has a ripple effect on other benefits like pension, bonuses, gratuities, and any other benefit pegged to the employee's salary. Employers must state what happens to the 'cut' salary and benefits when business resumes.
Responsible employers repay gratuities once business resumes or pay them back immediately business picks up. It is essential for employees to ensure their employer confirms in writing the salary to be applied when calculating their dues in case of redundancy during this period.
Whereas the standard is to use the last salary to calculate severance pay, employees should ensure that their payment is pegged to the salary paid to them before the pay cut.
Employers can apply other options after pay cuts before declaring positions abolished. In a later instalment, we will discuss employee rights during unpaid leave.
