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Can an employer reduce wages from the next day due to the emergency situation?

19.03.2020


The employer informed its employees that it would reduce their wages from the next day. Are employers allowed to do this? 

Answer of the Labour Inspectorate There are currently two options for adjusting wages – wages are adjusted by agreement between the parties pursuant to section 12 of the Employment Contracts Act or unilaterally by the employer pursuant to section 37 of the Employment Contracts Act. 

Pursuant to section 12 of the Employment Contracts Act, an employment contract may be amended at any time by agreement between the parties. Hence, the employee and the employer may agree that the wages of the employee will be adjusted starting from the next day. If the employee does not agree, the employer cannot unilaterally reduce the wages from the next day. 

Pursuant to section 37 of the Employment Contracts Act, the employer may unilaterally reduce the workload and the wages of the employee for up to three months (not below the minimum wage) if the employer, due to unforeseen economic circumstances beyond its control, fails to provide the employee with work to the agreed extent and to pay the agreed wage. 

Subsection 37 (4) sets out that an employer shall provide a notice to the trustee or, in his or her absence, the employees of the reduction of wages no less than 14 calendar days in advance. Within these 14 calendar days, the employee may express his or her views and consider whether he or she is willing to work on a reduced wage. If the employee does not agree to it, he or she will be able to terminate his or her employment contract by giving at least five working days’ notice (the employment contract must be terminated at least five working days before the reduced wages become effective). 

The Employment Contracts Act does not provide for specifications whereby the employer could unilaterally reduce the wages immediately. The consent of the employee is required if the employer wishes to reduce the wages from the next day. Therefore, the employee has the right to refuse the adjustment of wages effective from the next day. If the employee refuses, the employer can unilaterally reduce the wages only after 14 calendar days at the earliest (subsection 37 (4) of the Employment Contracts Act).

Read more:

An overview of the articles about the coronavirus on Tööelu.

Frequently asked questions in connection with the coronavirus (teleworking, business trips abroad, lay-offs, holiday without pay).

Photo: Pixabay

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