Can employers impose salaries reductions on employees due to COVID-19?

Salary Reductions

Salary reductions are one of the recommended steps instead of retrenchment. However, employers must first consult and obtain the consent of its employees before applying any pay cut of salary deductions. Employers should communicate transparently with their employees about the reason for the salary reduction, and explain that this is an attempt to prevent more drastic action such as a retrenchment. An employer may also want to consider a corresponding reduction in working hours to justify the salary reduction.

The company may appeal if the employees refuse to accept such reduction after communicating with the employer. However, the employee needs to prove that the pay cut as a last resort after considering all other alternatives due to extreme financial difficulty.

The frustration of Employment contact

Employers are not advised to use the doctrine of frustration as a result of the movement control order. This is because the principle of frustration only applies when the contract becomes impossible to perform, and not merely more difficult to perform. 

The employment contract still can be performed as it is only for a short period of time. Besides, some nature of the business allows the employees to be productive from home. Hence, the employer cannot frustrate it.

Employers force their employees to take paid annual leave?

Generally, employers cannot force their employees to take paid annual leave. Although paid annual leave is not an absolute right of the employee and is subject to the approval of the employer, the employer cannot unilaterally deduct the employee’s annual leave entitlement to cover the MCO period. The employer must consult and obtain the consent of its employees.

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