Can you cut pay for your employees?

On Behalf of | Jun 19, 2024 | Employment Law

As a business owner, you hope you don’t have to cut your employees’ pay rates. But you also know that it may be necessary. For instance, you may know that you need to cut costs, and reducing pay rates means that you won’t have to fire anyone.

That said, even if you feel that you have a valid reason for the reduction in pay, employees may not be happy about it. Some of them may say that they don’t want to work for a lower pay rate or that it’s unfair because they only took the job at the previous rate. They never would have taken it for less money. Are you allowed to reduce their pay?

You can cut pay moving forward

Yes, you are legally allowed to reduce your employees’ pay, and that is not a violation of their rights. They may feel that it is unfair, but unless they have a contract stating that they must be paid a certain amount, their pay rate can be adjusted. Most workers are at-will employees who do not have contracts at all. 

The key is that this can only apply to hours that the employees will work in the future. You can change their pay moving forward, but you cannot change it retroactively. If employees have already worked a certain number of hours that they haven’t been paid for yet, they deserve their old pay rate. But you can inform them of the change moving forward, and they have the option to either accept that new rate or quit their job.

Disputes over money can be very serious, and it’s important for both employers and employees to know what steps to take.


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