Salary Cuts?

rroberts · April 2007

Can the employer cut back salaries for exempt employees as a "cost saving measure" because sales are slow. And if so, are there rules to follow as to who and how much?

lnelson · April 2007

We have done this before and as long as you give proper notice to those involved you are ok you must also keep them above the minimum rate for exempt employees.

We did all exempts 10% across the board. It lasted approx. 2mths. then they were returned to their old rate.

Everyone understood why although we could not tell them how long it was going to last.

Sally · April 2007

We did this a few years ago. It was the equivalent of two weeks' salary, spread across the remainder of the fiscal year. At the end of the fiscal year the original salary was reinstated. We had all employees sign a document stating the purpose, the timeframe, and the employee's new weekly salary would be.

ACU Frank · April 2007

The "proper notification" process is a state-by-state requirement. In Missouri, for example, we have to give written notice 30 days in advance. "In advance" has been held to mean it's 30 days until the new pay rate takes effect, NOT 30 days until a paycheck is issued reflecting the new rate. I know it sounds obvious, but someone had to test it, I guess.

stilldazed · April 2007

Yes, you can do it.

Caveats:
1. Ensure that the new wages continue to satisfy the FLSA minimum for exemptions.
2. Make it accross the board for everyone in similarly situated positions as a defensive move in case you are challenged for discrimination.
3. Record everything related to the move for recordkeeping purposes--the reasons why, what was done, the duration if known, expected outcome--and document how the decision is related to your business.
4. Communicate it well or as well as possible to your staff. Though this is a negative step, there is a way to get buy in, and buy in is important if you want your staff to help your company weather the storm. The last thing you really want is a mass exodus from disgruntled workers who feel like they aren't being treated fairly or are being penalized for something over which they may have no control.

Let us know how it turns out. What you are thinking of is part of a retrenching strategy that many of us may be required to face from time to time. Because it is retrenching, your workers will also be interested to know what else your company is doing to help remediate whatever the circumstances are that are driving the decision.

Best wishes.

rroberts · April 2007

Thanks to all who replied. We will proceed cautiously and hope we can avoid having to make the decision to rollback salaries.

Salary Cuts?

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