Monday 9 May 2016 9:36 am

Can you blame employers for cutting benefits and perks because of the National Living Wage?

Matt Gingell is a specialist employment lawyer based in London. Matt advises businesses and employees on all employment law issues.

Matt Gingell is a specialist employment lawyer based in London. Matt advises businesses and employees on all employment law issues.

Since the introduction on 1 April 2016 of the National Living Wage (NLW) there’ve been plenty of employers in the news for making cuts to staff perks.

Le Pain Quotidian, Zizzi, Caffe Nero, Eat, Tesco, the John Lewis Partnership and B&Q have all cut back on certain benefits. 

Most of these businesses have denied that the changes are being introduced because of the NLW, but either way, there has been a flurry of perks cut.

The question is, are bosses doing anything wrong if employees’ benefits are removed?

What’s the law?

Firstly, you need to look at the contract of employment.

If there’s clear wording that the employee is entitled to a benefit then there’s likely to be a contractual entitlement. The employer couldn’t change or take away the benefit without the employee’s consent. Usually though there will be some mention of the benefit being discretionary and the employer reserving the right to amend or withdraw the benefit at any time. If there’s discretion, the employee will probably not have a right to the benefit.

Even if the employee has had the benefit for some time, it would be difficult to argue that the benefit has become contractual. Relevant factors to consider would be whether the benefit was known to the whole workforce; how often and over what period the benefit was provided; and whether the benefit ever changed. 

Each case will vary

What if an employer does cut a benefit that the employee is contractually entitled to without their agreement? The employee could continue working but make it clear that they’re working under protest. Alternatively, the employee might consider resigning on the basis that the employer had fundamentally breached their contract of employment. Depending on the circumstances, various claims could be considered.

However, if an employer cannot get the employee’s agreement there’s another option for the employer. As long as the employer can demonstrate a sound business reason for cutting the benefit, carries out consultation as required, warns that any continued refusal could result in the employment being terminated and offers re-engagement on the new terms, a subsequent dismissal could be fair.

When employers cut benefits and perks they may well be acting within the law. Whether they have a moral obligation not to make those cuts is something else.

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