Managers are being cautioned against making unilateral changes, even modest ones, without thinking through the implications, writes GERALD FLYNN

EMPLOYERS AND managers who are tempted to take “decisive action” by changing employees’ pay and terms of employment may be planting legal landmines.

With widespread pay freezes and some pay cuts across the economy, there is a temptation to impose corrective action to contain costs – forgetting that there is a legal relationship between employers and their employees.

This was a strong theme at the recent Chartered Institute of Personnel and Development (CIPD) annual law conference.

Managers were cautioned against making unilateral changes, even modest ones, such as removing perks such as free newspapers, personal use of mobile phones or free coffee, without thinking through the implications.

Another tempting move is to bluntly declare: “No bonuses will be paid for 2008.”

It sounds very decisive and authoritative but it could prove a hollow stance, as many bonuses are not entirely discretionary.

There may be a discretionary aspect on whether a bonus is paid which is clear-cut, but in many cases a bonus is a fact of life and the discretionary part may, in how it is calculated or the individual sums allocated to particular employees, be passed on performance reviews, sales or targets.

Even if a bonus payment is not specified in an employment contract, it may have become custom and practice during the boom years. In recent months, even cash-strapped public bodies like Dublin City Council and the Health Service Executive have been paying bonuses to senior officials and administrators.

Employment lawyer Jackie Kelly cautioned those at the CIPD conference to rein in their enthusiasm and ensure that any restructuring undertaken is both within the law and maintains employee engagement.

She noted that some employees might declare: “I am refusing to participate in this recession!” on the basis that the organisation in which they work is continuing to trade profitably and enjoys health margins.

There is a bit of golf-club folklore doing the rounds that an employer can simply tell staff that he or she is imposing a 10 per cent wage cut from next month and will be providing new terms and conditions, and if they do not like it, they are free to move on.

This is a bit of laissez-faire labour market wishful thinking.

A gutsy employee, presented with this Hobson’s choice, might well consider quitting and initiating an action for constructive dismissal on the grounds of unilateral diminishing of their employment terms and conditions.

Kelly noted that many macho managers are doing this on a daily basis but it is legally risky, though probably allowable under British employment legislation.

There, an employer could argue that it was necessary for sound business reasons to terminate an employment contract and then re-engage the person on inferior terms.

In Ireland, if the employee does not raise an objection within a few days or weeks, the change in employment conditions would probably be deemed to have been accepted. The safest approach is to get each employee’s written agreement to the amended employment terms.

In unionised workplaces with collective representation, this may often be easier as the union reps will often help to sell the cuts to save employment. Even in these situations, though, an individual may opt out and an employer cannot take a union official as acting as an agent of an employee even if they are paid-up trade union members.

Overall, it is much easier to persuade employees of the merits of a one- or two-year temporary pay cut or freeze than to try to impose a blanket 10 per cent or 15 per cent salary reduction on basic earnings.

There are others ways to skin a cat, as was pointed out by solicitor Maria Gleeson, who told the CIPD gathering that non-contractual perks can be adjusted.

First, an employer needs to look at the actual employment contract (assuming they are compliant and have them). Instead of paying fixed mileage and subsistence rates, it should be possible to reimburse actual costs incurred, though this is proving protracted to introduce for the politicians in Leinster House.

Usually, overtime is not guaranteed in employment contracts, although there may be a requirement to work overtime periods as needed.

Reducing or abolishing overtime could be a painless and cost-effective initial saving.

A lot of fringe benefits are loose and are contractually specified, leaving them open to immediate cuts but preferably by consultation rather than managerial diktat. Otherwise, the office staff might start asking impertinent questions such as why the corporate seats at Lansdowne Road and the corporate membership of the K Club are being maintained in “these difficult times for us all”.

Ms Gleeson outlined other avenues to explore such as three-day weeks, longer unpaid summer holidays, incentivised career breaks, job-sharing and study-breaks, but warned that all decisions and selections in these areas need to be made without any bias and in compliance with the employment equality legislation.

Therefore it is advisable to keep notes of all reasons for implementing new work arrangements and document the new terms under which a person is either working shorter hours or on agreed leave from the organisation.

Gerald Flynn is an employment specialist with Align Management Solutions in Dublin. gflynn@alignmanagement.net