By Luke Anami

There has been widespread debate on whether there is anything legally wrong with reducing the salary of an employee. This has been ignited by the decision by the Salaries and Remuneration Commission to reduce the pay scales for State jobs, including for the president, members of the Judiciary and MPs.

According to the ministry of Labour, salaries can only be reviewed downwards under special circumstances.

Discussions

“Under the country’s Labour laws, an employee’s pay cannot be reduced without discussions between the employee and the employer. Even in situations where a company is facing financial problems, the two parties must still discuss and agree,” Commissioner for Labour Sammy Nyambari said in an interview with The Standard.

It is important to recognise that an employment contract cannot be unilaterally varied by one party without the consent of the other.

If an employer attempts to impose a reduction in an employee’s salary without their consent, then this entitles the employee either to resign and claim constructive unfair dismissal or continue to work “under protest” but sue for compensation for the losses suffered as a result of the reduction in salary.

“If an employer is contemplating reducing employees’ salaries, then they would be best advised to attempt to seek agreement with their workforce so that such a change can be implemented by consent,” Nyambari explained.

In the current economic environment, employees are likely to agree to a reduction in salary if this is seen as an alternative to being made redundant or being under the threat of redundancy.

Ultimately, if an employee refuses to agree to a reduction in salary, then an employer has the option of terminating the contract of employment by giving them their contractual notice and then offering a new contract on a reduced salary.

Wiggle room

However, this wiggle room for employers has not been wholly accepted.

“You cannot revise the salaries of workers downwards. International Labour Organisation conventions, which Kenya is a signatory to, protect wages,” Francis Atwoli, the secretary-general of the Central Organisation of Trade Unions (Cotu), said following SRC’s revision of MPs’ monthly pay to Sh550,000 from Sh850,000.

Employers, though, need to be aware that if more than 10 employees are affected by such proposals, then they will legally be obliged to consult with a trade union or employee representatives concerning the proposed changes.

A failure to properly engage in this process could force the employer to give significant compensation awards.