My company is undergoing a merger and told everyone today their plans for restructuring our contracts. Basically we were told that we would be receiving less salary per month but have the possibility of making it up in our bonuses.
It’s a fairly large company here so I’m sure they checked all the legal boxes with doing this but is there anything that can be done to fight this?
My concern is they’ll probably short everyone on their bonuses when the time comes successfully cutting everyone’s annual salaries. The twist is that on paper our salaries remain the same, but a large portion of it is moving to the bonus.
for example:
(old system -> base salary 5,000,000 bonus 1,000,000)
(new system -> base salary 4,000,000 bonus 2,000,000)
How can a company collectively change everyone’s contract like this? I haven’t even had a request for a meeting with HR or have been asked to sign a new contract. Is such a drastic contract change legal?
Has anyone had experience with this and found options to exercise? I def would appreciate the insight.
12 comments
Bonus part is not protected, if company decides for a reason not to pay bonus, you can’t do anything about it.
If your « yearly » income is 10 millions, and you get a 500k per month and a bonus of 8 months of salary, they can decide this year bonus will not be paid and your real yearly income will become 6 millions.
When a change affects the whole company it doesn’t need approval from workers
HR would need to get your approval for compensation change only if it affected only you or a few others workers
As others have said, there’s not much you can do. Your best option is to find a new job. Companies do this with the express purpose of being able to pay less since the bonuses don’t have to be paid and the reason for not paying them doesn’t need to be justified. This move is a company wide pay cut.
I had no idea a company could do that. I mean even if it affects “everyone”, isn’t it a breach of contract?
In any case you should clearly look for another job asap
Bonus part is rarely ever paid in full. Average employee likely only receive 50% of “estimate” with even top achievers barely getting close to 90%. It is effectively a major pay cut. I suggest you find a new job while you can still use your previous higher salary to negotiate a better offer.
My company is doing this too. It’s legal and affects everyone, there’s nothing you can do.
I think you and me might be at the same company. If the bonus is baked into the contract (or the 就業規則), then it’s part of your annual compensation. It can theoretically fluctuate based on performance (say if you get a C rating in your evaluation), but the amount that you lose with a bad evaluation has a limit, so you will still get a good 90+% of your promised annual salary.
If the number 0.9 rings a bell, feel free to DM me.
> How can a company collectively change everyone’s contract like this?
You have a “designated representative” employee, who is supposed to be elected. This person signed off on the change.
If this person was not correctly elected, the change is out and out illegal. Sadly, quite common for companies to basically appoint a shill – but it’s highly illegal to do so, and if a bunch of you got together and collectively complained to labour, there might be an investigation….
That being said – changes to the working conditions that are disadvantageous to the workers generally require individual worker signoff. (Article 9 of the Labor Contract Act) If this was not obtained, your company may be trying to pull an end run, and they may be running afoul of the law.
When an employer makes universal changes to working conditions, they CAN force this through by a change to the rules of employment (Article 10 of the Labor Contract Act) – but there are some serious hurdles. The biggest hurdle is that the change has to be necessary and reasonable – and the Supreme Court has ruled that they can only be held effective if they are “reasonable based on a high degree of necessity” ([Judgement text here](https://www.zenkiren.com/Portals/0/html/jinji/hannrei/shoshi/07602.html))
The changes themselves carry no criminal penalties, but are subject to civil action, and are fairly easy to win thanks to the Supreme Court judgement above.
Rigging the representative employee elections, though….
Under the current laws;
A representative of the majority of workers shall be a person who falls under all of the following.
(1) Not a person in a position of supervision or management
(2) A person who has been elected by a method such as a vote or a show of hands that clearly states that a person who will enter into an agreement, etc. as stipulated in the law shall be elected, and shall not be elected based on the intention of the employer
Part time and contract workers are also included in the vote.
If the company (employer) appoints or automatically appoints the representative that person was not selected by the employees to conclude agreements on behalf of the workers, and* any agreement concluded by them is null and void*.
Get a few coworkers to pitch in, and get a lawyer on it.
And whoever the representative employee is… it would be a shame if there were posters placed around the workplace noting that they were the ones who signed off on this change. Totally unprofessional conduct that I would never recommend.
I love when they overly complicate a way to pay you less. I bet they were all smiles and telling you what an awesome new opportunity all the employees would have at making the company more money.
My company did the same thing and the union agreed to it. The switch was accompanied with a moderate raise across the board to push everyone toward acceptance. I was and still am against it.
The bonus amount is directly stated in the contract so it *seems* guaranteed. So why do it? I reckon it is for any new employees coming into the organization. The company suddenly has a new and lower salary scale for any new hires. Now they simply reduce the bonus percentage.
Perhaps I’m missing something from the company’s perspective. Tax implications?
Your best course of action is to quit and find a better place to work at.
While you work through the other actions recommended by the other comments, see if you can get the details of the bonus structure.
My expected bonus is calculated as equal to 8 months salary but it is distributed across guaranteed, personal performance, department performance, and company performance. The distribution varies hugely by level.
People at lower grades have at least 4 months value guaranteed and the remainder is mostly personal performance, but higher levels can be as low as one month guaranteed and almost entirely department performance.
An important thing that makes this work is that everyone is receiving a decent living wage on the monthly base salary alone. This is a hard limit that your labour union needs to enforce.
If they are going to use a similar tiered distribution at your company, you might end up in an okay position for now, but I’d be worried about higher ups abandoning ship.