Tom Cruise with Katie Holmes

Tom Cruise has been forced to take a multimillion pound pay cut after his film development contract expired.

The 44-year-old Top Gun star and his business partner Paula Wagner will no longer receive more than ￡4million from Paramount Pictures to develop movie projects and cover overheads.

Cruise, who is worth around ￡250million, is now paying the ten staff at his Hollywood office out of his own pocket, according to the Los Angeles Times. His latest film, Mission: Impossible III, grossed more than ￡200million. But the film company just broke even because the actor received a substantial share of the profits.

His lawyer, Bertram Fields, told the paper: 'We received an offer and we are digesting it. We will sit and talk about it. It is not the case that they said this is a take-it-orleaveit offer. I don't think my friends at Paramount would ever talk that way.'

The pay cut comes as many Hollywood studios try to reduce costs in the face of uncertain box office returns.

But another major factor behind Cruise's ￡4million blow is thought to be his increasingly erratic behaviour over the past twelve months. As a result, the diminutive star has seen his popularity fall - making him a weaker box office draw. His romance with Katie Holmes, an actress 17 years his junior, triggered a series of bizarre stunts and public displays of affection.

Cruise hit a personal low during his sofajumping spectacle on the Oprah Winfrey show, when he declared his love for Holmes.

A spokesman for Paramount said: 'We have the utmost respect for Tom Cruise and Cruise-Wagner Productions. We are currently in discussions to renew their deal.'