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Jun09

Hourly rate reduction

We are working on a standardized salary plan. I have an employee in a group home that makes higher than the rate we are setting as standard for that facility. Can I lower her hourly rate to be equivalent with the other workers?

Most states operate under employment at will doctrines. Thus, outside of collective bargaining agreements or employment contracts, employers can alter the terms of their employment agreements with employees. Employee compensation can be reduced as long as the employee continues to earn at least minimum wage. Keep in mind that reducing the wages of exempt vs. non-exempt workers has different ramifications. Since the employee in this case is hourly paid let’s discuss the possible consequences for reducing a non-exempt worker’s pay.

The most notable consequence will be employee morale and, consequently, productivity. The employee will understandably be upset and not understand why her salary must be affected simply because the company wants to create a salary structure. Additionally, resentful employees tend to communicate their negative feelings about the company. So, the company must determine if negative publicity, both internal and external, is really worth it.

Compensation directly relates to employee satisfaction with their job. Reducing the employee’s pay, may encourage the employee to look for work elsewhere. So, consider the impact to the group home and the company of losing this particular employee.

Lastly, it was stated that the employee’s pay may be reduced to be in line with the other group home workers. Is this employee entitled to earn more due to longevity with the company or her experience in her field? Would it really be fair to reduce her pay to be equivalent to her co-workers with less tenure and less experience?

Another option in this situation is to allow the employee to remain at her current hourly rate. Remember to document that the employee is being grandfathered in to the new salary structure. It’s important to note that if there are other employees in similar situations it must be clear why certain employees are being grandfathered in and not others.

This entry was posted on Monday, June 9th, 2014 at 7:37 pm and is filed under
Compensation.
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