UK: Dismissal and re-engagement on new terms – no need to repeat inducement offered to agree new terms

Employers seeking to reduce pay by consent may choose to offer a one-off payment as compensation for the reduction and in return for avoiding the risk of litigation. If this offer is rejected, and the employer decides to dismiss and offer a new contract with the reduced pay terms, its failure to also make the one-off payment to those dismissed will not itself make the dismissals unfair.

Whether the dismissals are fair will depend on balancing the employer's business reasons, the extent to which it consulted with staff and attempted to agree changes, and the degree of impact on the employees. Here, although the impact was significant (an 18% pay cut in some cases), the employer's action was reasonable given that the business's long-term viability was at risk if costs were not reduced, it had taken other steps to reduce costs, and the relevant pay structure was divisive as some employees were on lower rates and some on higher pay were receiving more than the market rate. The level of employee acceptance of the change is also a relevant factor. (Slade v TNT (UK), EAT).

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Filed under Jurisdiction: UK, Remuneration (including bonus and incentive plans), Termination of employment, Terms of employment contracts

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