Human Resource Blog

decrease in salary

I need to decrease a payroll from $12.50 to $11.50 until my business picks up. Is there an effective way to do this?

Yes, there are several ways to do this. The easiest might be to simply decrease employees wages by $1 per hour. This is completely legal in every state, as long as the employees are informed in advance that their wages will decrease. (You cannot implement a retroactive decrease.) The best practice in HR is to let employees know one full pay period in advance. So if today is payday, you would inform the employees that after the next check, they will earn $1 per hour less. (One or two states require more notice.)

Be aware that an employee who quits due to this change in wages often qualifies for unemployment benefits.

Another way to control payroll would be to reduce the number of hours that the employees work, without changing the hourly rate. For example, you might have employees work 30 or 35 hours per week, rather than 40. As the employer, you control the employees schedule and no advance notice is required to change it.