Up or Down

“I have an employee who isn’t doing well in his job. I want to cut back on his wages to better match his value to us. Is this legal?”

Your HR Survival Tip

What goes up can go down. You always want to be careful when making changes to an employee’s wages or salary. There are legal considerations, plus you want to be aware of the ramifications of the message you are sending.

You may change an employee’s wage or salary by providing an increase or decrease in the amount. The most common reasons are an adjustment based on an analysis of the employee’s skills, changes to the job market, or temporarily as a disciplinary action. Considerations when lowering a wage or salary include:

  • Providing advance notice of at least a few days but we prefer two weeks, if possible. You may find it easier to time it for the start of a new pay period but it’s not necessary.

  • Ensuring the wage or salary still meets the legally-required minimums.

  • Informing the employee of any other changes that will happen as a result, such as the employee’s title or job description or the timekeeping and meal/rest break rules if moving from a salary to an hourly wage.

  • Recognizing how this change may affect pay equity within your company.

  • Putting it in writing so there is no confusion about the amount, exempt status, or effective date.

The messaging about this change is critical if you want to keep the employee and to ensure the employee fully understands why this change is happening. If this is part of a disciplinary action and only temporary, provide in writing what caused this action, changes you expect to see (if any), and talk through it with the employee. If you are reducing the wage or salary because performance and his demonstrated skill set is lower than you expected, let the employee know why this new wage makes more sense in comparison to his coworkers and what he needs to learn to be eligible for a future raise or promotion.

Don’t expect the employee to be happy about this change, no matter what your explanation might be. However, the more detailed explanation and justification you provide, the more likely you are to retain the employee. If you believe this employee could become the employee you really need, work with them to help them grow and learn those skills. If you really don’t have a need for someone with less skills than you thought they had, use that as your explanation for termination rather than a demotion. Dropping someone’s wage or salary is serious so you want a really good, legal reason.

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