UK’s Salary Sacrifices to Combat Today’s Economy

Since the UK has gone into recession, headlines about companies cutting back on their staff have become a standard occurrence.

Although we have become use to reading it, it still doesn’t mean that we want to become part of the statistics or approve of it. There is just nothing that we can do about it.

“If an organisation holds onto people and is not making redundancies, then it eats into company profits,” John Philpott, chief economist at the Chartered Institute of Personnel and Development told Personnel Today.

“A firm can tolerate that for a while if it thinks demand for its goods and services will return, but if not, then a second wave of redundancies is expected later this year.”

However, a recent trend from companies can decrease the number of redundancies but they would need your help to do this.

Big name companies like British Airways, BT and KPMG have introduced their ideas of how to save jobs.

These include either pay cuts, working four-day weeks or going on an extended holiday.

British Airways, the national flag carrier of the United Kingdom has experienced extreme losses of more than £400m.

Their chief executive Willie Walsh commented at the annual shareholder meeting in London that there “is no point trying to skirt around the fact that we need a fundamental and structural change to our employee cost base”.

"These changes are essential to our short- term survival and more importantly to our long-term,” Walsh added.

As a result the company tried to encourage its 45,000 employees to consider pay cuts or even working a month for free which was obviously not received favourably.

It’s not only normal UK citizens who will need to assist their companies through pay cuts as those at the top could face this as well.

The government didn’t take any bonuses this year and David Cameron plans to cut senior Tories salaries with 25pc if they are elected as the favourite party at the next election.

“Clearly, if we are going to ask the country to reduce some parts of public spending and getting the budget deficit down, we need to show that everyone is going to share in that work, including government and politicians,” Cameron said.

“I want to make sure that politics costs us less in Britain and I would make sure that my government would take a lead in that.”
BT the privatised UK state telecommunications operator, made a loss of £124m due to the fall of business and introduced flexitime options, sabbaticals as well as part-time contracts to their staff to prevent redundancies.

KPMG the international accountancy firm also gave their employees a choice between working a four-day week or taking a sabbatical at 30pc of their pay.

KPMG people director, Dave Condor commented on these choices to Personnel Today and said: “We do believe that this is a route to save jobs, when it is combined with re-training, redeployment and other options in the firm. These things together have undoubtedly saved jobs for us.”

Taking a long break or having long weekends every week of the year can have its advantages but as The Telegraph reports, it also has its drawbacks if you don’t manage it well.

Jane Pye, executive recruitment consultants Ashley Hoyle told the newspaper: “Taking a sabbatical can have a positive or a negative effect.

“If you use your time well, then it can be a good thing, but companies run the risk that once their employees have some headspace they may decide to change career or join another firm. Staff who take time out could find that when they return, things have changed and they have been sidelined – as can happen when women come back from maternity leave.”

Maria (28) from London works at a financial services company and is currently working four days a week to assist her company with financial trouble but it is influencing her lifestyle.

“It has meant a drastic lifestyle change for me from being able to pick up and go and do anything whenever I wanted to actually having to think about every penny I am spending,” Maria admits.

But what if loosing a day’s income doesn’t only affect your lifestyle but your life?

There are many people who count on every single penny they receive and most of these people won’t be able to embrace a sabbatical or a four-day-working week because it means they won’t make ends meet.

The truth is that some people are paying off mortgages or have a family to look after and they aren’t in positions to take a gap year away for reality.

In this case, do you have to take what the company is offering or do you have rights?

According to the UK law you can’t be forced into choosing a pay cut or any of the methods your company proposes.

If a company is experiencing financial difficulties the company can only ask their staff to vote.

The Telegraph reports that if the majority of the votes are supporting something you are against, the company can’t hold you accountable to accept the same outcome as the mainstream.

The newspaper warns that when you do accept a pay cut, you must be adamant to know until when you will be accepting it and get this in writing.
It is also important that you keep in mind that your benefits like pension, Working or Child Tax Credit can be affected if you are working less hours and earning less.

“Some benefits such as medical insurance or life insurance are usually subject to the terms of these schemes, and employers often renegotiate less favourable terms with the providers. In these circumstances there is often little that can be done,” Graham Darwood from city law firm LLG Law told the newspaper.

Then there are the rest of the UK who might not necessarily need to take pay cuts or sabbaticals but the current economy affects them too.
Most companies are not awarding any staff bonuses and with the increase in everything else this is to some extend just as good as a cut in your salary.

“There are far worse things than not getting a bonus, like loosing your job altogether for example, but I would be lying if I said it’s not affecting my family,” comments Chris (34) from Manchester.

“Saving for a deposit on a mortgage has just become ten times harder and it means our budget for everything else is tighter than it has ever been, but at least we still have our jobs,” he added.

It is understandable that each individual’s personal situation is different than a colleague’s and therefore if you can not afford a pay cut it is best to get legal advice and be open about this to your bosses.

In the end it comes down to you. Can you afford it? If you can, do it because you can prevent others from having a more daunting fate.