Cutting a worker’s pay may become necessary. As an employer, it is not a task you relish, but you may need to reduce employees’ pay to avoid layoffs and help the company be financially viable.
Pay reductions sometimes lead to conflicts with these employees, so it is important to know how to do it legally. The following tips can help you avoid significant mistakes and oversights.
Only apply the change moving forward
First and foremost, never try to reduce an employee’s pay for hours that they have already logged. You can tell them they will make less money tomorrow, but you cannot tell them that they are actually going to earn less for work they did yesterday.
Inform the employee upfront
Similarly, the employee needs to be told about the pay reduction before they work any hours at the new rate. This gives them a chance to agree to the reduction and intentionally work at the lower rate.
Avoid any type of discrimination
Furthermore, pay cuts should never be discriminatory. Do not reduce pay for all female employees but not male employees, for example. Be conscious of protected classes and ensure that pay reductions apply to your staff equally.
Always adhere to minimum wage
Finally, even though you are the business owner, you do have to adhere to wage and hour laws. This means you can never reduce someone’s pay rate below the minimum wage, whether or not they agree to it. The minimum wage in Kentucky is $7.25, the same as the federal minimum wage.
These steps can help you avoid legal issues, but if disputes do arise, be sure you know what steps to take.