Temporary Partial Pay Reductions

 An option that employers have, to delay the need of a layoff, is to reduce pay of its employees on a temporary basis until the financial issues at hand dissolve. According to the National Federation of Independent Business these are the key points to remember when considering a cut in wage or hours for your employees:

• You can reduce wage or hours of a nonexempt hourly employee, (if it remains above minimum wage.)
• You can reduce wage or hours for a salaried employee, (if the weekly pay is above $455/w.)
• Reasonable advance notice is law, so give as much notice as practical.
• If an employee is represented by a union, compensation or hours will need to be negotiated with the union, “unless the collective bargaining agreement gives the employer the right to make such a reduction.”
• Across the board wage cut is the safest way to avoid legal action. If you are more selective, make sure you clarify your objective criteria.
• Unemployment compensation might be available to the employee for a reduction in wage or hours.

According to Small Business Chronicle, “salary changes aren’t always legal. Whether a company can legally cut a worker’s compensation depends on his status under federal law and any private agreement between the employee and his employer.”

The good news is that this is temporary and there is an overall consensus when using a temporary partial pay reduction is that things will get back to normal.

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