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.