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Can you legally cut someone’s pay?

On Behalf of | Nov 25, 2024 | Business Litigation

Businesses do not always do as well as hoped. Any number of factors could cause you to have to tighten the purse strings. One measure you might need to consider is reducing your wage bill.

One way of doing this is by reducing the number of staff. Alternatively, you might prefer to try and keep all those people in jobs by reducing some or all of their wages.

You can only do this going forward 

Wages for hours which people have already worked are sacrosanct and you cannot retrospectively reduce an employee’s wages. You can however opt to reduce their wages going forward as, if they do not like it, they have the choice to leave. Be careful if they have contracts, as any change might violate the terms you agreed to.

Bear in mind that most people are not going to like having their wages cut, even if some employees understand it is the best option to keep the company and their jobs alive. This discontentment could create problems so it is important to be careful how you do it and communicate clearly why you are doing it to reduce the risk that someone claims it is for an illegal reason.

For example, if you decide to make a larger cut to the wages of a department that happens to have a much higher rate of non-white employees, than a department made up of mostly white employees, workers might suspect discrimination is at play. 

Cutting wages will always be a contentious subject, so you may want legal guidance to assess the risks and deal with any legal actions that result.