Human Resource Blog

Pay Cut

Due to the recent economy, we recently hired a consultant to look for some opportunities to help us in our industry. Many good suggestions were made that the company liked and he was offered a permanent position in the production area of the company. After doing this, the owner decided that the current manager should be given a pay cut but there is no change in his title or job responsibilites; he is being told this is not a demotion. He is the only person in the company to be affected by a pay cut and I am wondering if this can come back in any way to hurt the company.

No, we do not see any particular problems with this pay cut. Many, many salaried employees have had to accept a pay cut in the past 18 months. As long as the manager is still making at least $455 per week before taxes, he is still exempt.

If you took this action based on the managers race, color, religion, sex, etc, obviously that would be illegal discrimination. But it appears that the owner has simply decided to allocate his payroll dollars elsewhere — to a former consultant who provides more value per payroll dollar  spent. You should document what this new employee brings to the table, but we do not see a problem with this action.

If you had a number of managers at the same level, with similar job duties and wages, and you reduced the salary of only one manager, that might well be a problem. In face, it might be illegal discrimination based on sex or another protected status. But simply reducing the current managers salary is not.