Wage Adjustment

chec · January 2002

We have a new manager who has developed a pay scale based on the job category. Within the category, he has developed the job skills and requirements to perform the job. Each job category is broken down into three levels. He has reviewed all employees' performance in the job category and has found poor performers with only the basic skills are being paid at the top wage rate with that job category. He is asking permission to reduce those employee's hourly wage rate and increase others who are high performers. Can we do this without legal implications? Most of these poor or marginal performers have been with the company a long time, and as a result, their annual raise(across the board %) has resulted in their the high wage rate. We have never decreased an employee's rate; however, we have not given an increase to a marginal performing employee.

Down_the_Middle · January 2002

I'm unclear why a new manager is permitted to develop a salary and perf rating system that is different from what the organization is using and it's also unclear about what type of system you currently have for all other employees. While my initial reaction was to ask "what is this all about"?, I would need more info b/4 concluding what I suspect needs to be done.

chec · January 2002

Thanks for your questions. Unfortunately, in the past this division's management has had no specific guidelines in place to evaluate employee performance. For the most part, employees have been given an annual cost of living increase. We have just recently developed job descriptions and are in process of implementing performance appraisals. This request to review wage rates comes about as a result of this process being developed by the new management.

Down_the_Middle · January 2002

Given the fact that the development of your new system is light years behind what this manager is proposing, I think it would be VERY premature to permit him to decrease the rates of pay for those "marginal performers" that have yet to be officially defined by the organization. His enthusiasm to "right the ship" is admirable, but doing it on his own will be viewed as arbitrary by most employees and the new system is not likely to be successful. Rather, once this system is better defined, it would be more appropriate to roll-it-out to employees so they understand the new criteria to judge their performance. Evaluating an employee on a system that looks back to view their performance with criteria that wasn't known to the employee 1 yr ago is hardly a valid or reasonable system.

My suggestion is to HALT the new manager until your new system is in place and eveyone understands it. Trying to force this will likely create equal pay, wage and hour, employee relations and possible discrim issues that you'll not be prepared to adequately defend. Resisting the temptation to roll this out as a 100 yd dash will save you enormous time and $'s............Good luck orchestrating this endeavor.

Theresa Gegen TX · January 2002

IF what you say is true (that long time employees will get their wages reduced and short time employees will get their wages increased), I think your company will have a BIG problem with age discrimination (whether perceived or real). I would be very careful in lowering the wages of long time employees, especially since some of the performance categories are probably very subjective (which would allow factors other than performance to slip in).

Also, I think lowering the wages of long time employees will have a really bad effect on employee moral.

Any plan to implement wage changes and lower wages for groups of employees needs to be looked at closely from a discrimination perspective AND the company needs to do a cost-benefit analysis (because I can guarentee that some employees will get attorneys and look for a reason to sue over this)! Some employees may also have contractual or promissory estoppel claims that could come into play.

Before anything is implemented, your company definately needs to get legal advice.

Good Luck!

Margaret Morford · January 2002

I would also suggest that you get an outside expert to look at your compensation plans do an entire wage study. This will tell you if you have equity problems and if you are competitive within the marketplace. When this is done, the outside expert should identify where you have people that are over the maximum for their jobs and where you have people that are below the minimums for their jobs. This study should give you validated internal equity and external equity comparisions. It also is compelling evidence to use if anyone sues you for acting on the data. I can refer you to a compensation expert if you like. Call me if you want a referral.

Margaret Morford
theHRedge
615-371-8200
[email]mmorford@mleesmith.com[/email]
[url]http://www.thehredge.net[/url]

Wage Adjustment

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