Lowering employees' wages is anything but simple

An employee's salary is a primary employment condition that you may not simply reduce unilaterally. In principle, a reduction is only permitted with the employee's consent (recorded in writing), and never below the minimum wage or the collective labor agreement. A unilateral reduction—even with a modification clause—rarely succeeds: the judge weighs the interests and usually sides with the employee, unless you demonstrate with a concrete plan, supported by figures, that a small reduction would avert bankruptcy.

If things go well, employees want to share in the profits. During the coronavirus crisis, some employers wondered if it could also work the other way around: temporarily lowering wages. Understandable, because wages are a major expense — but it is not simple.

Agreeing together to lower the salary

Wages are a primary employment condition, and in the Netherlands, an agreement is an agreement. You pay the agreed wage in exchange for work, and you cannot simply change this unilaterally. What is always possible is a change with which the employee agrees — as various football clubs did during the pandemic. However, few employees simply settle for less; a lower wage has disadvantages, and moreover, unemployment benefits are calculated based on the last earned wage.

If an employee does agree, record this in writing. Please note: you may not reduce the wage indefinitely — the minimum wage and the collective labour agreement constitute a lower limit, regardless of the agreements.

Unilaterally reduce the salary

You can rely on several grounds to unilaterally reduce wages: good employee conduct, unforeseen circumstances, or reasonableness and fairness. A modification clause may also be included in the employment contract . A dissatisfied employee can then file a wage claim, after which the court assesses its validity through a balancing of interests (even in the case of a modification clause).

In practice, the judge almost always rules that the employee's interests outweigh those of the employee. In the worst-case scenario, you not only have to pay the wages retroactively, but the statutory increase, interest, collection costs, and legal costs are added to that — and the employee may even demand dismissal with compensation due to poor employership. Therefore, unilaterally reducing wages is usually unwise.

When is it finally possible?

There are rulings in which a judge accepted a unilateral wage reduction after all: for a reduction of a few percent, involving a significant employer interest, and when it is the only way to avert bankruptcy. However, you must be able to substantiate this with a concrete plan supported by figures.

Frequently Asked Questions

Am I allowed to reduce an employee's salary?

Not just unilaterally. It is possible with consent (to be recorded in writing), but never below the minimum wage or the collective labour agreement. A unilateral reduction rarely succeeds.

Does an amendment clause constitute a free pass?

No. Even in the case of a modification clause, the judge weighs the interests, which usually works out in favor of the employee.

When does the judge accept a wage reduction?

Sometimes in the case of a small reduction with a significant employer interest, if it is a last resort to avert bankruptcy, substantiated by a concrete financial plan.

Advice on wage reduction

Reducing a reduction unilaterally is usually not a good idea; often, finding a solution together is better. The employment lawyers at MKB Juristen advise you and formalize the agreements. View our expertise in employment law or contact us.