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Pay Cut Based on Performance California

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  • Pay Cut Based on Performance California

    Are there any regulations or guidelines that must be met if a company wishes to cut an individual's pay due to performance issues? We hired some people with certain expectations and they are not panning out. as oppose to firing, we would like to do a pay cut.

  • #2
    I cant speak to the legal issues in California, but what are you hoping to accomplish by lowering the pay rate? If the person is unable to do the job now, is it an issue of training or motivation?
    If training is needed, then training will be most effective. If the person isnt motivated now, do you think they will be more motivated if their pay is lowered?

    If they arent working out, why dont you want to terminate them?
    I find that the harder I work, the more luck I seem to have.
    Thomas Jefferson

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    • #3
      Do you think that cutting their pay will incite them to do a better job?
      The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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      • #4
        Bottom line we wish to do a review and give a pay reduction to individuals whom are not performing to company standard, before letting them go (like a last chance). On the other side if they improve (after the pay cut) we will give them back their original salary.

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        • #5
          Not a common way of handling things. Not inherently illegal if done correctly. I am skeptical that things will work out the way you want them to be, but I am skeptical of a great many things. Employers I have worked for routinely use a small base pay coupled with conditional performance based bonus payment. That is a more traditional method.

          My real concern is that there is a really good chance is any employee who gets this will have one foot at the door at that point, and whose future actions with your company are maybe suspect. I am fine with a "come to Jesus" meeting - these are the problems, this is your very last chance to fix them, but coupling the "review" with the wage cut seems to be questionable. If the employee is bad, you need them fixed or you need them gone. Soon. And I would assume that the "sure, clean up your act and we will give you a raise" to be B.S. if I was the one receiving that message. Future raises are always at best "maybes". I have had too many promised raises forgotten to assume that management is ever remotely sincere about such things. In my experience, you want a raise, you wait for a good economy and change employers. And managers maximum their own raises by not giving them to their subordinates.
          Last edited by DAW; 12-29-2010, 05:14 PM.
          "Reality is that which, when you stop believing in it, doesn't go away".
          Philip K. **** (1928-1982)

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          • #6
            As long as the employees are notified of the change before any work is performed under the new rate, it is OK.
            But, as other posters have mentioned, it is not the way to motivate, train, or improve performance. Just think, would you work harder? What type of training or feedback have they been given? Is this a first time notrification for these underacheivers?

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            • #7
              You want to be sure you don't cut their pay below minimum wage.
              Too often we underestimate the power of a touch, a smile, a kind word, a listening ear, an honest compliment, or the smallest act of caring, all of which have the potential to turn a life around. Leo Buscaglia

              Live in peace with animals. Animals bring love to our hearts and warmth to our souls.

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              • #8
                With the caveats that Betty and Angel have indicated, this is legal. However, I stand by my initial opinion that this will serve as a demotivator, rather than a motivator, and that things are not going to go the way you anticipate. Although it is legal, I think doing so is a mistake.
                The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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                • #9
                  I agree that this is not the best of ideas.
                  Too often we underestimate the power of a touch, a smile, a kind word, a listening ear, an honest compliment, or the smallest act of caring, all of which have the potential to turn a life around. Leo Buscaglia

                  Live in peace with animals. Animals bring love to our hearts and warmth to our souls.

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                  • #10
                    I have heard of demotions. But generally you have to have a lower position to be demoted to. Like VP to crew supervisor. This sounds like you just think you arent getting your monies worth. heh.

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                    • #11
                      Let me speak as someone who just dealt with this (happened Tuesday). We had an employee receive a promotion and raise during 2010. She couldn't do the job and was demoted back to previous position without a lowering of salary.

                      During budget talks it came to light and the site was ordered to lower her salary (approximately 25%). Even though it was explained that the lowered salary was correct for her current position and was a little more than she was making before the promotion, she took it as an insult and walked.

                      None of the managers involved sought my thoughts before doing this, I was informed after the fact.

                      My advice is to be prepared for the employee to walk and you will need to rush to fill the slot.

                      Comment

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