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London Weighting: ‘Can my employer cut the perk as I’m working from home?’

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07/09/2020
Many staff in the capital benefit from an allowance to cover the extra cost of living and working in London. But with hundreds of thousands working from home, can your London Weighting be cut?

Many public and private firms pay workers a London Weighting element which recognises the additional costs of living and working in the capital.

According to Trust for London, a charity tackling poverty and inequality in the capital, London Weightings average £4,000 a year and is an allowance more commonly seen in finance, manufacturing and public sectors rather than retail or not-for-profit industries.

But with the lockdown measures amid the coronavirus pandemic and workers urged to work from home where possible, the capital’s streets have been described as ‘ghost towns’ as employees heeded the advice.

While the government is now telling workers to return to offices, many will undoubtedly choose to remain working from home if their employer agrees.

So, what does this mean to the London Weighting pay perk? Could this be cut or even removed as workers benefit from the flexibility of working from their homes rather than commuting into offices?

Kate Palmer, associate director of advisory at Peninsula says many companies are looking at ways to cut their costs in the current climate and it is “no surprise” that attention has been drawn towards London Weighting.

“Removing this additional rate of pay may become something that London-based businesses do look to consider if remote working does become more permanent.

“Now staff are no longer commuting through the city, employers may start to consider whether London Weighting is as necessary”, she says.

This is because unlike the National Minimum Wage, there’s no single body that sets the rate so Palmer says for businesses that do offer this element of pay, “it’s entirely up to them if they seek to reduce it, and how much they should do this by”.

What are the rules around reducing London Weighting?

Removing London Weighting from an employee’s wage would technically represent a change in the terms and conditions of their contract, unless there’s a specific term allowing the employer to make such a change.

Julie Duane, a barrister specialising in employment law at St Philips Chambers, says: “It really does depend what the contract states in each individual case.

“Also, there will be other factors to take into consideration in the current situation where an employee works from home. After all, there are expenses involved in working from home, such as the cost of heating and electricity, that should be considered in the contract between the employer and employee when working from home. This may however differ where the request to work from home is by the employee and not the employer,” she says.

Palmer adds that employers will need to seek the agreement of their staff before any changes to their contract.

“A reasonable period of time should be provided to staff in order to consult with them over this change to their contract. Once the change is confirmed, staff should be provided at least one month’s written notice.”

However, where an employee isn’t inclined to agree to this change and reduction in pay, Palmer says one option for employers is to dismiss and re-hire them under a new contract without the London Weighting element.

“Employers should proceed carefully here as, depending on how they approach this, they could face claims from an employment tribunal for constructive dismissal. If more than 19 members of staff are to be dismissed and re-hired, employers also have a legal obligation to consult with trade unions or elected staff representatives,” she adds.

Could a bonus be reduced to accommodate London Weighting cut?

Where employers understand any move to cut London Weighting from an employee’s pay will be unpopular, they could scale back on bonus payment instead.

But Palmer says they need to be careful here again as if a bonus is specified in the contract, they’ll need agreement from staff to remove it.

“The issue does get more complicated when considering a bonus that isn’t in a contract of employment but has become a common occurrence in a company. For example, an employer may wish to not provide Christmas bonuses going forward, but the employees may argue that, as they have received this for the past five years, it has become a contractual right due to it being a common custom or practice. In this situation, it is likely to be safer to still seek staff agreement”, Palmer states.

Will London Weighting become a perk of the past?

The concept of a London Weighting can be traced back to the early 20th century, according to Trust for London, but despite the radical change from the working norms due to coronavirus, Duane says that talk of the perk becoming obsolete, appears “premature”.

She says: “London is far more expensive than any other UK city and this cannot be overlooked.

“The government is keen to get workers back to the office everywhere, including in London. It can’t allow London to become a ghost town with empty restaurants, coffee shops, etc.”

She added that the pandemic will alter the landscape, but maybe not as dramatically as some may think.

“We will see changes around flexibility, but talk of the end of the office at this stage is premature. While virtual platforms go some way to business demands, there will be organisations and wider scaled projects which will need the ‘in person’ approach.”

Indeed, Reed employment agency reveals that key words including ‘working from home’ and ‘flexible working’ in job adverts have more than quadrupled in the past year – from 2% in 2019 to 9% in 2020.

Another major factor which has been at the fore throughout the pandemic relates to mental health issues. As such, Duane says that many people are looking to get back to a place of work.

“Many workers will be amenable to working back in the office, and this may especially be the case with millennials, who are looking for and used to that social element,” she adds.

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