As a business owner, you set your employees’ wages. There are some restrictions, of course. For instance, you have to pay employees at least minimum wage. But you do get to make the final decisions regarding things like starting wages, pay increases, raises—and even pay reductions.
It is worth noting that reducing an employee’s pay is not likely to be well accepted. The employee will quickly understand that they have to do the exact same amount of work, but they are getting less compensation. They may also be frustrated that they took a job with a higher pay rate, only to have it reduced after the fact.
2 key facts about pay reductions
In order for the pay reduction to be legal, there are a number of things you need to consider. First and foremost, if employees are already owed money for hours that they have worked, you can’t reduce their pay for those hours. You can only cut their pay for future hours. An employee may be making $30 an hour right now, but you can tell them they will only make $20 an hour moving forward, and they can then decide if they want to keep working at this new pay rate.
The second thing to remember is that the reduction can’t be done for discriminatory reasons or other reasons that may be illegal. For instance, say that an employee files a sexual harassment claim. If you then reduce their pay in retaliation, even if it only applies to future hours, it could still be a violation of their rights.
Addressing a dispute
Issues with pay can sometimes lead to disputes between employers and employees. Make sure that you know exactly what legal steps to take to address these and find solutions.
