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

The recent decision from a London law firm to cut home-workers’ pay by 20% has sparked debate

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.”