Can Your Employer Cut Your Salary? Only if You Agree to It

Dozens of companies have dismissed thousands of workers either due to the economic slowdown or in expectation of them. Many employers, however, prefer to keep dismissals as an option of last-resort in order to retain veteran employees who have made a contribution to the business.

Many of these employers are searching for other ways to cut costs, often by reducing worker benefits ranging from the traditional gifts for the holidays to company cars and university tuition for employees' children.

But can an employee unilaterally cut employees' compensation packages? The law is clear on this issue. An employer is prohibited from making any cuts to workers who make minimum wage (NIS 3,800 a month), even if the employee agrees to it, since it's against the law to pay less than the legal minimum.

When the base salary is higher than the minimum wage, the employer cannot reduce it without the worker's express permission.

In many cases employers have turned to employees - usually mid-level or senior-ranking ones making over NIS 10,000 a month - and asked them to agree to a wage cut of between 5% and 10% or more.

In some cases management promises to restore the cuts after the economic storm passes, and even to pay back the amount that each worker lost.

Any workers who insist on retaining their base salary as is, refusing to accept the cut, must inform the employer, orally and in writing. The employee has the right to sue the employer if the latter insists on trimming his or her salary in that event.

The legal situation regarding a one-sided withdrawal or reduction in worker benefits is different from that of the base salary.

According to attorney Gilat Vizel Saban, who specializes in labor law, employers have the right to terminate benefits or bonuses that are tied to specific goals, such as increasing profits or breaking into a new market in a particular year, if the goals are not met. In that case the employees have no legal recourse.

"However," Vizel Saban said, "there is legal uncertainty regarding benefits that an employer has given employees for years, independent of targets being achieved, to the point where they have become the norm or part of the salary package. It's not clear whether these benefits can be withdrawn."

Vizel Saban says that even if an employer manages to cancel benefits through the courts it may not be worth it. "Even if the employer finds a legal way to cancel a particular benefit that has been paid to employees for years, it could cloud the workplace atmosphere and undermine the workers' feelings of confidence in their place of employment."

According to Vizel Saban, "It's a difficult balance for the employer" between avoiding panic within the organization while trimming costs. She suggests cutting special benefits such as expensive holiday gifts and organized trips during the workweek.