Can bosses legally take away benefits and perks because of the national living wage?

On the back of the National Living Wage, can employers cut benefits and perks?

After the introduction on 1 April 2016 of the National Living Wage (NLW), all eyes have been on employers making cuts to perks and benefits. Zizzi has reportedly limited its free food menu for eligible employees (to a margherita pizza or a spaghetti pomodoro) and reduced the amount waiting staff can earn from tips. Caffe Nero has stated that it would stop giving free lunches to staff. Eat is reportedly no longer paying staff during their lunch breaks. Tesco, The John Lewis Partnership and B&Q have also been in the news for changing Sunday, Bank holiday or overtime rates.

Most of these businesses, though, have denied that the changes are being introduced because of the NLW.

From a legal perspective, are businesses able to take away employees’ perks and benefits?

The starting point is to see what’s written in the contract of employment. If there’s clear wording that the employee is entitled to a benefit, such as a free meal, paid lunch breaks or an overtime rate, then there’s likely to be a contractual entitlement. The employer couldn’t change or withdraw the benefit without the employee’s consent. Usually, though, there will be some reference to the benefit being discretionary and the employer reserving the right to amend or cancel the benefit at any time. If there’s some discretion, the employee will probably not have a right to the benefit.

Could it be argued that over a period of time the benefit has become contractual? Could you imply a term into the contract to that effect?

Supposing, for instance, through custom and practice, an employer gives employees free lunches? Unfortunately for the employees, just because they have free lunches for a number of years will not necessarily make the benefit contractual. Relevant factors to consider would be whether the free lunches were known to the whole workforce and published in an accessible document such as a staff handbook; on how many occasions and over what period the free lunches were provided; and whether the position ever changed. Ultimately, the key question would be whether the parties intended the free lunch benefit to form part of the contract.

The other thing to remember is that nothing can be implied if it’s inconsistent with an express term of the contract, unless there’s an intention to vary the term. So taking the free lunch example, if in the contract of employment the employer had discretion to offer free lunches, you could only imply that over the years the benefit had become contractual where there was an intention by the employer and employee to change that discretion.

What if an employer cuts a benefit that the employee is contractually entitled to without their agreement? The employee could continue working but make it clear that they’re working under protest. Alternatively, the employee might consider resigning on the basis that the employer had fundamentally breached their contract of employment. Depending on the circumstances, various claims could be considered.

However, if an employer cannot get the employee’s agreement there’s another option for the employer. Providing the employer can demonstrate a sound business reason for cutting the benefit, carries out consultation as required, warns that any continued refusal could result in the employment being terminated and offers re-engagement on the new terms, a subsequent dismissal could be fair.

So, employers who do cut benefits and perks to compensate for the extra costs of the NLW may well be acting within the law.

Matt Gingell is a partner at Gannons Solicitors, and specialises in employment law. Read all of his articles at www.mattgingell.com