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Two-thirds of businesses considering pay cuts for home workers, survey reveals

18 Aug 2021 By Elizabeth Howlett

Research also finds the majority of firms have already suspended, reduced or removed location allowances for remote staff

More than two-thirds (68 per cent) of organisations are considering pay cuts for staff who opt to work from home, new research has found. 

A survey of 150 business leaders in organisations that pay location allowances, conducted by CIPHR, found that many firms said they were considering pay cuts for home workers despite over half (53 per cent) saying they’ve managed to save money by having a remote workforce. 

Two-thirds (68 per cent) of employers have given all or most of their staff the option to work remotely, however, those wishing to be fully remote are more likely to face a pay cut than their hybrid colleagues. 

Almost two-fifths (39 per cent) of employers admitted to singling out fully remote workers for pay reductions, compared to 29 per cent for hybrid workers.




The majority (97 per cent) said their employees would be allowed to continue working from home at least some of the time, but this was more likely to happen in smaller firms: more than a third said they would let their staff have a remote option, compared to only a quarter of large businesses. 

Additionally, location allowances such as the London Living Wage and other geographical premiums are also at risk. According to the survey, the majority (86 per cent) of employers have already suspended, reduced, or removed these payments during the pandemic because of home working. 

Less than half (49 per cent) have reduced the premiums temporarily, while a quarter (23 per cent) have placed a temporary hold, and 14 per cent have made the changes permanent. For the remaining 14 per cent of organisations that haven’t made any adjustments to their location allowances yet, 29 per cent are reportedly considering doing so. 


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Ian Moore, founder of HR consultancy Lodge Court, said that making permanent changes to employee financial packages was not straightforward. 

“Employees will need to agree to this before any changes are made to any contractual payments, and there are other considerations to take into account outside of the money savings this could achieve,” said Moore.

He added that making reductions in today’s candidate-led market could mean that firms were “unable to attract the right talent for your business, and even more worryingly may push talent out”.

Beverley Sunderland, director of Crossland Employment Solicitors, warned of potential legal repercussions for employers that denied flexible working requests and used it as a bargaining tool to cut employees’ pay. 

“While an employer might try and refuse a request on other grounds, if there is evidence that taking a pay cut was the key to getting flexible working agreed, then tribunals may decide that this was the real reason for the refusal,” said Sunderland. 

She added that “this could result in a payment of eight weeks’ pay, capped at £544 a week currently, for each employee affected and an order that the employer review their decision”. 

A separate survey of 448 organisations, conducted by employment law and HR support firm Ellis Whittam, found that a third (33 per cent) of employers expected staff who previously worked full time in the workplace to return every day post-pandemic. 

Additionally, more than a quarter (28 per cent) said they expected staff in for three days and only 14 per cent said they would offer complete flexibility.

James Tamm, director of legal services at Ellis Whittam, told People Management the disparity between fully office-based and hybrid working policies would create very different company cultures and operational challenges. 

“All businesses considering making hybrid working part of their normal working pattern must act now,” he said, referencing how people are still living and working with the risk and uncertainty posed by Covid.

Tamm added that “while it’s too early for most to say what form of working is their best long-term bet, employers must at this point ensure regular dialogue with their employees”.

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