If your demotion plan is centered on the employee attitude or performance, it will not solve the challenge yet. I wish that I had better news for you… Evaluate why you should demote the employee. Before you pull the trigger, you should make an effort to give employees an opportunity to turn things around. For example, an employer could demote an employee because the employee was not meeting the employer's performance expectations, even if the employee disagrees with the employer's evaluation. Demotion is a right any boss maintains - as long as it’s performed in a lawful manner. When hourly employees work more than 40 hours in a work week, their employers must pay them 1.5 times their base hourly rate for every extra hour worked. The statute also refers to vacation "time," which would indicate that what an employee accrues is not an amount of wages, but instead an amount of time. Worse, you may be found liable for failing to meet these requirements and compelled to pay an employee not only backwages but also huge amounts as damages. You may also have the right to a severance package, depending on the policies of your employer. You should evaluate your reasons for demoting the worker to ascertain the corrections necessary for the position. Therefore, if the employee chooses to reject the demotion, their employment may be terminated. In general, exempt employees must receive their entire weekly salary if they perform any work, even if it’s only a few hours, and may not have their pay docked for petty offenses without risking their exempt status. “If you’re going to demote anyone, you have to do it very cautiously.” Witzel said companies often choose demotions in order to avoid the severity of firing an employee outright, and the potential legal liabilities that come along with it. This means a demotion cannot be effected unilaterally by an employer without consulting the employee. State of Texas employees are subject to a disciplinary reduction of wages, based on poor performance. If you don’t follow these basic rules, you could end up in a labor court defending a decision that may seem appropriate but which may lack certain legal requirements. Payment at your final rate of pay indicates you would be cashed out at the lower (final) rate you were earning at the time of termination. For example, you can offer them reduced hours or increased annual leave entitlements. Employees whose contracts are terminated can bring claims for unfair dismissal, even if … However, he warns that demotions can just as easily result in legal fallout if handled lightly. This must be made within 21 days of the termination of employment. And, no matter how thoroughly you plan your strategy, expect surprises. If they don’t agree, you must pay them the full amount for their normal working hours as stated in their employment contract, even if you have no work for them to do. 2014 will be a fat-trimming year and a year in which goods and services become more expensive. If not then you have no claim here. A salary reduction can’t occur unless you notify the employee of the pay cut first. You are legally required to to do so by seeking comparable employment. There's not enough information here to provide you with a good response. Have you mitigated your losses. As an employer or an employee, you have specific obligations to uphold your employment contract. He has stated this verbally and announced that the. In fact, there are two legal avenues that employers can pursue in order to persuade their employees to accept a change in pay or working conditions, Marinus says. If you are demoted without notice, you could be frustrated because this often leads to a cut in pay or fewer work hours. Similarly, if your employer has requested that you self-quarantine or has asked staff to go on leave as a result of COVID-19, they are not necessarily required to continue to pay their employees. It can be difficult to get out of an employment contract, but there are ways it can be legally done, which saves you from facing a potential lawsuit for breaching the contract. Most employers can reduce an employee’s pay as long as: 1) they tell the employee first 2) It’s not a case of discrimination 3) The pay cut isn’t breaching a contract 4) the pay cut doesn’t reach below minimum wage. Salaried and exempt employees are not usually paid overtime when they work more than 40 hours in a week, and some employers are switching workers from hourly to salary in order to lower their costs. If done properly, you will be able to legally demote an employee without undue legal repercussions. However, before an employer can demote and employee they are obliged to follow a fair procedure. This means that an employer can promote, demote, hire, or terminate an employee without giving a reason, leaving you with no legal recourse. Then, if she does not improve her performance, you can demote her with less concern that she would file a FMLA or other claim. If you're employed at will, your employer doesn't just have the right to fire you without notice or cause. Protections at work All employees have protected rights at work. If the employer has offered you the same pay and benefits and you refused it, a court may find that you failed to mitigate. 1 answer I was an assistant manager and I stepped down due to health issues, but the company put on my paperwork that i was demoted, but i wasn't I stepped down, there is a difference and I don't want a demotion on my record, what can I do? Accordingly, it can demote (or even terminate) an employee for any reason or no reason at all, with or without notice. If you do so, you would need to resign without undue delay so as not to give an impression that you had accepted the breach. Your case is different, the demotion is performance related, not how long you hae been an employee, and so your pay can be reduced to the level you will now hold. If your employer has the ability to allow you to work remotely and you are able to continue to perform your usual duties, then you are entitled to your usual pay and benefits. “If you demote someone and you can’t establish just cause for demotion it’s going to be constructive dismissal.” Documenting all the steps you took to support the employee is a good defensive step, but the right approach with the individual could help your organization avoid a lawsuit all together. However, the reduction can't go below a certain salary level for the employee's job group, and employees are aware that low performance ratings can have an effect on their salaries. In that meeting, you can explain why working from home in her current capacity is not feasible and brainstorm other options with her. If neither option can apply to your situation, you would be an at will employee. When you work as an employee for someone else, you run the risk of being terminated or demoted at some point. Check when you can claim money back from an employee, for example overpayments or training costs. An employer can decide for itself who to hire or employ. Is it because you can no longer afford to pay the salaries of nine supervisors? Generally speaking, if you are an employee at will (no contract), you can be terminated (or anything less, such as demoted and pay reduced) for any reason, so long as it is not illegal (for instance, discrimination based on a protected class like age, race, sex, disability, religion, etc.) You would have to argue that your employer had committed a fundamental breach of contract and that you were left with no other option but to resign. It's legal, and unfortunately, it's, often good business. So an employer can elect to fire more highly compensated staff and replace them with less highly compensated workers. 1. Give It a Last Shake. You will then lose entirely; Consider the cost of losing. These protected rights include: workplace rights; taking or not taking part in industrial activities or belonging or not belonging to an industrial association; being free from discrimination. I recently found out that the company owner boss is going to demote an employee to a lower position. The same amount of money could be saved by firing four or five employees of questionable committment and productivity, theoretically improving the health of your company. Before you decide what to do, you and the employee’s manager should sit down with her in an interactive process meeting. ; Employees can’t be treated differently or worse because they possess or have exercised a right, or for a discriminatory reason. You might be thinking of seniority, which is different, and usually only applies when comparing apples to apples. Final pay when someone leaves a job Why someone's pay is often different when they leave a job, including how holiday entitlement affects final pay. If the policy of the employer is to provide a severance package to laid-off employees that were let go due to circumstances not in their control, then a buy-out may give you the right to … Exempt employees must earn at least $455 per week or they lose their exempt status, and the employer is liable for back overtime. If you’re going to be Reducing an Employee’s Pay, you must make sure the reasons are ethical. The fact is that most work relationships are "at will". There could be plenty of reasons why their performance is … Yes, you are the only person who got a pay cut, but can you prove that it was because of sex, gender, age, race, etc. The employer can be wrong, stupid, or unfair, and it's not illegal. If an employer cuts pay without notifying an employee, it can be considered a breach of contract, depending on if there’s a contract involved. Inform employees of any salary reductions before changing their pay rate. This means that a company can set the conditions of work much as it sees fit. That pay cut means that the company can afford to pay for the health care of about 12 entry-level employees. There is a way to demote an employee without setting off an explosion. Any income earned will be deducted from your claim. If an employee doesn’t agree to a reduction in pay, an employer could terminate their employment contract by serving them with contractual notice, then offer a new contract on a lower salary. Their career aspirations and ego may be tied to their current rank, so you may need to offer them the option of leaving. It can also modify the terms and conditions of your employment without notice or cause. If your business needs to cost-cut, you can offer your employees benefits to make up for reducing their wage. It’s important not to make any commitments in the meeting. Of the two, the best-known route is to propose terminating the employment contract for operational reasons, using the procedure in section 189 of the Labour Relations Act. Yes, they can. Hence, you may be entitled to apply to the Fair Work Commission for unfair dismissal. Even if the contract is verbally implied, both employer and employee are bound by that contract. Illegally demoting or firing an employee can put the management or ownership team in court contesting a discrimination and/or illegal termination lawsuit. Then you can claim constructive unfair dismissal in an employment tribunal. Employer or employee can end the employment relationship at any time, for any reason. If you have a contract, and the employer violates any terms of this contract, you can sue the employer for breach of contract. If you cannot, then an alternative approach would be to reinstate the employee to her original position or an equivalent one and specifically discuss her performance problems and give her an opportunity to improve. In answer to the above question, yes, you can ask your employee to take a pay-cut, but no, they do not have to agree. For more information, you can read our guide on ‘Steps to Make an Unfair Dismissal Claim’. Reducing An Employee’s Pay Unilaterally.