The EAT has examined the issue of dismissal for refusing to accept a pay-cut. It was held that the question is not whether the employee acted reasonably in refusing the lesser terms but whether the employer was reasonable in dismissing for that reason. Some key details:

  • The EAT considered the size and administrative resources of the employer’s undertaking as well as whether the dismissal ‘was in accordance with equity’. This involved consideration as to whether management had also been subjected to a pay cut.
  • In this case, the employer decided to cut its workforce’s salary by 5% in order to avoid redundancies.
  • The employee refused the variation of his contractual terms and was dismissed. He brought a claim of unfair dismissal.

The EAT has referred the case to a new tribunal. The EAT did find that the tribunal was wrong to say a pay-cut would only be appropriate if the survival of the business depended on it.

Key point: Implementing a pay cut in certain circumstances can be a very effective money saving method. However, it is essential that the employer acts reasonably and follows a reasonable procedure in doing so.

Garside and Laycock Ltd v Booth