Kenyan employers across all sectors are feeling the economic pain of the coronavirus pandemic. There is cause for alarm, noting that business has slowed down, salaries are due and employees will expect salaries regardless of whether the business’s operations have stalled or significantly reduced.
On 25th March 2020, the President of Kenya issued a directive that top government officials will have to take pay cuts. It is foreseeable that most employers will have to consider this cost cutting measure in the face of liquidity challenges from COVID-19.
Whilst this may seem as a straight forward process, the law has set out the procedure for salary reduction. In this series, being Series 005, MMW Advocates has answered FAQs on salary reduction;
- Can an employee’s salary be reduced or varied?
Yes, all contractual terms including an employee’s salary, can be varied as a cost cutting measure. However, salary reduction must be done within the confines of the law.
- Can the employer impose salary reduction measure on an employee?
An employer can only propose salary reduction but not impose it or force it upon an employee. Forcing an employee to take a pay cut is tantamount to economic duress.
- Are there particular legal steps that need to be taken prior to salary reduction?
Yes. The law stipulates that an employer shall in consultation with the employee(s), revise the contract to reflect the salary reduction and notify the employee(s) of the change in writing.
- What is the harm in imposing pay cuts? Isn’t the economic effect of COVID-19 obvious?
Well it is obvious that COVID-19 will affect operations of most businesses. Regardless of this, the law requires employers to still operate within the law. Any variation to an employment contract without the consent of an employee is deemed unlawful.
Employers must follow the law to avoid unnecessary litigation and liability that may lead to hefty pay-outs in compensating the aggrieved employees. The law does not allow for unlawful activities under the guise of the pandemic.
A best practice by employers would be to assure employees that their salaries may be reimbursed or alternatively normalized after a particular period or after the business’s operation is stable. These terms must be specific, unambiguous and well guided to avoid demands based on promises that may be unfulfilled if things don’t normalize.
Please feel free to reach out to MMW Advocates LLP for a more detailed opinion on the issue of salary reduction, the terms and nature of Agreements for Salary Variation and, the legal considerations therein.