Regrading and "red-circling"

We have recently changed to a new pay system. Some workers who were already at the top of their grade have been told they will only be able to progress further if they upgrade their skills. Alternatively they can stay at their present rate but with no further increases, until they are on the same rate as workers on the new pay scale who have the same skills. Can our employer do this?

This is commonly known as "red-circling" where workers keep their protected rate of pay but it does not then increase until their pay rate matches that of their new grade. Since there is nothing in law that requires an employer to give increases on a regular basis the system is unlikely to be open to legal challenge.

Unless there is a clause in their contracts which specifically gives employees a right to annual or regular pay increases the courts are unlikely to imply one, particularly in cases such as this where the rate of pay has been protected. There is one case, from 1973, where the courts were able to imply such a clause.

* More information: LRD booklet, The law at work 2003; York Trailer v Sparkes [1973] Industrial Cases Reports 518