Salary cut

Can your employer enforce a salary cut?

Can your employer enforce a salary cut? The good news is that, as a matter of fact, an employer cannot easily enforce such a measure.

This is mainly because the general rule is as follows:

Salary is a so called primary indicator of an employer which can be set against the primary performance of an employee to work. Furthermore, salary is essential to be able to support oneself. In other words, it is obvious that an employee has an substantial interest in unaltered maintenance of his salary.

Dutch case law

A short while ago, a judge had to decide on whether to agree with a proposal of an employer to cut an employee’s salary by 10%. The employer stated that all employees had to agree to a salary decrease of 10% in order to prevent the company’s bankruptcy. 69% of the employees had agreed to the proposal, as had the works council, the body representing the workers. One of the employees, however, did not want to comply with a 10% salary decrease. He decided to request full payment in legal proceedings. The judge agreed with the employee.

The judge could follow the employer as far as the bad financial situation of the company was concerned. However, in the opinion of the judge, the proposal was not reasonable. The employee could not therefore reasonably be asked to accept a salary cut of 10%.

Reasonable proposal?

Even though the works council and two thirds of the employees were prepared to accept the 10% salary decrease, the employer still could not force this employee to do so as well. Such a salary cut is not a reasonable proposal. On that basis, the employer cannot expect an employee to agree to such a proposal. The judge even added that even if the employer had a unilateral change clause (meaning that the employer can unilaterally make changes to the employment conditions), the outcome would have been the same.

In general, the employer cannot change the employment conditions without first obtaining the employee’s consent.

When an employer does not include a unilateral change clause in the employment contract, he or she will need a substantial business interest to decrease an employee’s salary. But even then, an employer would still need to prove that, on grounds of reasonableness and fairness, it cannot be expected from the employee to agree with modification of its employment contract.

Advice

Even when your employer’s financial position is not sound, do not conclude too easily that he or she can ask you to accept a salary cut. Not only does your employer need a substantial business interest, the proposal must be reasonable. The court usually does not consider a salary cut to be reasonable, whereas the court may decide differently on for example a change in a car lease agreement.

If your employer has asked you to accept a salary cut and you’d like advice on your specific situation, please contact us. Our experts in Dutch employment law will be glad to help you.

 

Godelijn Boonman - Expat lawyer (employjment law)

Godelijn experienced an international upbringing and education as an expat child living in Africa and England. Back in The Netherlands, she studied law at the University of Utrecht (1990). She then embarked on her legal career as a lawyer by working 10 years for the well-known law firm of ‘Wladimiroff en Spong Advocaten’. In 2000 she joined GMW lawyers as a partner and is the head of the Labour law and Pension section.

Godelijn specialises in international employment law and has extensive experience in dealing with both non-contentious and contentious international employment matters including (collective) redundancy packages and dismissal. She works for both companies and individual employees, enabling her to keep an open mind to both sides of a case. Naturally she helps her clients when a problem has arisen, but prefers to act before an escalation has taken place. Advice on a fair Human Resource policy is an essential part of her work.

Godelijn Boonman is considered to be the undoubted employment specialist for the expat community because she is bilingual, has a large international clientele and a wealth of experience in international employment law matters. She is therefore frequently asked to be the key note speaker at international seminars.

Godelijn has a keen interest in the international community and has been a member of the advisory board of ACCESS and the Women’s Business Initiative International since its beginning.