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Can you reduce an employee’s wages?

On Behalf of | Mar 25, 2023 | Employment Law

As a business owner, you may decide that you need to reduce wages. Maybe the income for the business is down, you don’t want to have to lay workers off and you realize that you just have to cut back on what you pay. 

You know that the employees are not going to be happy about this. But what you’re wondering is if you’re legally allowed to reduce their wages in the first place. Can you do so, or do you have to keep paying them what you agreed to pay when you hired them in the first place?

You can reduce future wages

It is certainly not illegal to tell an employee that you are reducing their rate of pay. But the key is that you can only reduce the wages for future hours that they have not yet worked. You cannot reduce wages for hours that they already have on the books. Those must be paid out at the rate that they agreed to when they worked those hours. 

If you do reduce their wages in the future, the employee also has to agree to that change. But this does not mean that they can force you to pay more than you want to. If they do not agree to the new lower rate of pay, then they simply need to be given the option to quit and leave their position. If they decide to stay on, then they are agreeing to take the lower wage, and there should not be a problem.

As you can see, it’s important to do everything in the correct order to make sure it is all legal. Employers who find themselves facing disputes also need to know what legal options they have.