Reduction of Pay
A reduction of wages/salaries differs to a deduction of wages/salaries. A reduction is the act of reducing whereas a deduction is what is being subtracted or removed.
Where there is a downturn in business, or there is less demand for a service, in order to avoid any potential redundancies, an employer should examine alternative options before proceeding with redundancies. The option of a salary or wage reduction is available and acceptable solution to a potential temporary situation.
The implementation of a salary or wage reduction is a change to an employee’s terms and conditions of employment. In accordance with the Terms of Employment (Information) Act 1994 an employer must provide one month’s notice of the change and an agreement from the employee.
However, section 5 of the Payment of Wages Act provides that an employer must first consult with the employee and seek their consent one week before implementing the deduction. It is recommended that the employee confirms their consent in writing and a sample agreement* is enclosed herein.
Where an employee refuses a wage/salary reduction, the employer cannot proceed with the reduction and must review alternative options which may be temporary lay off, short time, reduced hours or redundancies. Employers must be mindful of the selection process applicable to these alternative options.
Where an employee’s salary/wage is reduced without their consent, this can leave an employer exposed to liability under the Payment of Wages Act 1991, it can give an employee grounds for a Constructive Dismissals claim under the Unfair Dismissals Act and an employee can seek redress through the civil courts for breach of contract.
Employers must also be mindful that the reduction does not fall below the National Minimum Wage. The current National Minimum Wage is €10.10 per hour.
Salary Reduction Agreement
- Employee Information
Name: _________________________PPS No.:_________________
Mobile: _________________________Email: _________________
- Salary Reduction
Further to my meeting with management on the / / regarding business difficulties the Company is facing, I authorise ___% of my salary or €_______ to be withheld from my pay each pay period in accordance with Section 5 of the Payment of Wages Act 1991.
- Date Salary Reduction Begins
I understand that the salary reductions will start on the / / . (The date must be after the date you sign this agreement.)
I confirm that this document has been read over and explained to me prior to my signing it and that I understand and accept the contents of this document in full.