Can a salary be reduced?

Question

My company is restructuring positions and salary ranges, and they are informing people about their new salaries (sometimes 20% lower than their current salaries).

Is it legal for the employer to lower your salary?

They are going to provide a new contract, which I assume you aren't forced to sign (with the risk of having them terminating your employment).

This is in Berlin, Germany.

How legal is this?

Answer 1

Considering the sums at stake, talk to a lawyer ASAP, talk to the trade union if you are in one, talk to the works council (Betriebsrat) if there is one. Or talk to all three. If there is no works council, talk to your colleagues about forming one. The trade union might give information on that, even if you are not yet a member.

• Generally speaking, you and your employer can negotiate a new contract replacing the old one. If you sign freely what they propose, good for them ...
• If your old position will be made redundant, there may be a betriebsbedingte Kündigung. But there are protections in that case, you may have a right to Sozialauswahl (making not you but the 'least vulnerable' colleague redundant) and to retraining for a new position.
• If everyone is getting a pay cut, is the company in economic trouble or even Insolvenz?

Follow-up: As pointed out in the comment by nvoigt, they may be trying to stampede you into a decision against your best interest. Or the company is about to go under, and desperately trying to stay afloat. Either way, talk to a specialist lawyer and show him or her all the documents you got.

Some things depend on the size of the company, too. Check if there were announcements about a Sozialplan or Abfindungen. But for most employees today it is a jobseekers' market. Start looking for different jobs, and consider the Kündigungsschutzklage as a way to maximize your severance package.

Answer 2

While o.m.'s anwer is fine and gives you many of the German terms that may be relevant to you in the future, let me put another spin on this:

No, your employer cannot do a one-sided contract change without you agreeing. Your salary is part of your contract. It is aways possible to say "no" to any contract change your employer asks you to accept, without giving reasons.

Secondarily, Germany has excellent employee protection against being let go. As a general rule of thumb, as long as the company itself is not in trouble (e.g., approaching insolvency), and as long as there are no "reasons in the person or behaviour of the employee", it is very hard for the company to make someone redundant. (Note: all of this is true for companies of at least 10 employees, which I assume is the case for yours.)

So there you go. The most important advice for you is to not let yourself be pressured into signing anything. When your boss comes to you and asks you to sign, simply say no. And yes, I do know that this is everything but simple, but in this very specific case, it is the answer. Do not feel pressured into giving a reason, do not discuss this with your boss.

It is impossible for you to tell whether and how bad any repercussions will be, i.e. whether your company will try to mess with you later. They have no legal handle (unless Insolvenz looms, in which case you want to get out ASAP anyways). They may try to spread Fear, Uncertainty and Doubt, but this should not let you be pressured into signing anything.

The ball is firmly in the court of the company to give you a good reason to go along with their plans. As you do not give us any information about the situation, it is hard to give further concrete advice. Obviously it is always prudent to have a polished CV and at the very least put out feelers for potential new employers; the better prepared you are, the easier it is for you to stay relaxed in this situation. If push comes to shove, you find the names of all the relevant parties in o.m.'s answer; and if your company escalates, feel free to ask again.

Answer 3

You need to look into the old contract (which is the current contract you have with your employer until you sign anything new). If the salary is specified there as a fixed amount per a time period, then that number cannot be changed without both parties agreeing. If the salary, or its component, is specified through a reference to another document, you need to get that other document (e.g., a collective bargaining agreement) and talk to the signatories of that other document to understand whether any change that you cannot control is ahead.

If your contract hypothetically gives your employer a free hand over the entire salary (which is a legal possibility in Czechia but I'm not sure about Germany), then your situation may become somewhat more difficult, and you should still stick to the terms of the old contract and not sign any new one until you perfectly understand what changes, why that changes, and why you personally benefit from agreeing to any such changes.

If the salary reduction comes in the form of removal of bonuses that are in employer's discretion to award or not award, it is still possible that the company practice established over the previous years ends up protected by courts and that the employer will not be able to eliminate those bonuses one-sidedly. Signing a new contract lets you opt out of such protection, though.

Answer 4

1. In Germany, there is generally Vertragsfreiheit, the general freedom of individuals to enter into contracts voluntarily. It is a direct legal consequence from the constitutional paradigm of the citizen as self-responsible individual with the freedom to conduct their life as they see fit. You are free to sign a new contract with your employer. You are also free to not sign it.
2. People who offer you a contract without being asked to usually do that because they seek an advantage which usually corresponds to a disadvantage for you. Like every scammer, they try to make it seem urgent in order to railroad you. Do not sign it.
3. The general principle of Vertragsfreiheit is a mere fiction; in real life, most areas of commerce are regulated, often heavily so, restricting what contracts can be entered into. Due to its inherent asymmetry, labor is one of the most regulated areas of commerce. There are many things an employer cannot do, or only do with limitations; laying off employees is one of them. It is almost impossible to lay somebody off in a healthy company; it is possible but still heavily regulated for a company in economic distress. The terminations must be negotiated with the company's worker's council, if one exists. They must spare vulnerable people, must respect seniority, the victims may be entitled to compensation etc. If they try to lay you off, talk to a lawyer. You may be able to negotiate a cancellation contract which would be advantageous to you.
4. The worker's unions offer legal advice (e.g. here for the IG Metall). It is free for members. For non-members, they will at least be able to connect you to experienced lawyers, or offer direct consultations for a fee. They may also offer you immediate membership in exchange for immediate advice (this is a guess based on what tenant's unions do). Depending on the size and notoriety of your company the local union chapter may even be familiar with the company's situation and conduct.