Can Employers Pay Staff Less for Working from Home?

Remote work is, inarguably, the biggest work trend ushered in by the pandemic. Permanent remote work, hybrid work, and satellite offices have emerged as alternatives to the traditional 9-to-5 office.

It may be that your teams are still working remotely due to continuing public health restrictions in your region or you’re considering permanent remote work as it has been a more productive option. As you re-consider your work model, you may be wondering how much leeway you have when it comes to adjusting employee compensation accordingly.

Can I reduce the pay of employees still working from home?

You should do so only if the employee agrees to the reduction in pay. Changing a major term of employment without contractual rights or the employee’s consent is a breach of the employment contract. It may expose you to legal claims such as constructive dismissal.

How so?

Unless the employment contract allows it, changing major terms of employment such as the worker’s duties, salary, working hours or location is often deemed as a constructive dismissal. Since constructive dismissal is treated as a termination of employment, you would then be obligated to provide the employee with their entitlements upon termination as per the applicable employment standards legislation.

However, based on past precedents, the severity of the pay cut may also determine whether a court will see it as a constructive dismissal.

You should review your employment contracts first and see whether you have contractual rights to alter certain terms of employment.

Employers should keep in mind that if they are bringing in a policy that remote staff will get paid less, they should offer remote staff the option to return to the office at their original pay.

What about Regulation 228/20 in Ontario that suspends constructive dismissal during the COVID-19 period?

That is applicable only if the reduction in wages or hours of work is temporary and due to reasons related to COVID-19. This temporary change to the Ontario ESA does not apply if the pay cut is permanent.

The COVID-19 period is in effect from March 1, 2020, to January 1, 2022.

What other things should I keep in mind to avoid litigation?

Any policy you introduce should apply uniformly to all your existing remote workers to ensure everyone is treated equally. Determining which employee’s pay to decrease based on a protected ground under applicable human rights legislation (such as disability, age, race, sex, sexual orientation, religion, etc.) is illegal.

For example, if you are accommodating remote work requests from employees who are unable to get vaccinated due to medical reasons, unilaterally imposing a salary cut on them for not being able to work from the office could prompt the worker to commence a human rights claim. You should seek legal advice before taking any such action.

What other options do employers have for saving costs?

Instead of decreasing the salaries of current employees, you could:

• Hire new employees at lower salaries for full-time remote positions
• Introduce a salary freeze for your existing workforce.

Should you pay remote workers a lower salary?

The Canadian economy is currently facing a labour shortage. A recent BDC survey found that 55% of small and medium-sized businesses in Canada are having a hard time finding new employees.

At a time when competitive pay, benefits, and the option to work from home are being used as perks to attract talented candidates by companies, cutting salaries of your staff for working remotely may not be in the best interests of your business. You don’t want to lose skilled employees to competition during a labour shortage.

Moreover, a remote work set-up isn’t skewed towards employees. While remote employees do save time and money on bypassing the commute to the office, they also incur additional costs. These include increased utility bills and phone and internet consumption; not to mention the investment into setting up a home office.

Employers, too, save money (rent, overhead costs, kitchen and toilet supplies) when the majority of their staff are working from home. Plus, they have the opportunity to hire talented candidates on a national, and even international, scale.

Do you need help developing a remote work policy?

A comprehensive remote work policy will help you set clear expectations on work hours, legal rights, and cybersecurity measures. Peninsula’s experts can help you develop company policies as well as with any other HR, health and safety, or employment advice you need. To learn more, call us today at 1 (833) 247-3652