Pay Cuts

How to Handle Dreaded Pay Cuts to Staff

The fact of the matter is, pay cuts are a struggle for everyone involved.

As the employer or business owner, it’s a difficult situation that you need to deal with in a sensitive and tactful way. It can lead to you feeling frustrated, stressed and maybe even embarrassed that you could be letting your staff down.

For the employee, it can lead to feelings of anger, demotivation and the obvious financial worry that comes following a reduction in wages or salary. These emotions can then cause ructions in both professional and private lives, impacting relationships in work and at home.

We would be lying if we said there were any ways to make having to issue pay cuts pleasant. However, what we can offer is some advice on how to make the process as calm, painless and stress-free as possible for both parties. 

Make sure it’s an authorised deduction

Reasons why an employer is within their rights to issue a pay cut include (but aren’t exclusive to):

  • Legal obligations such as National Insurance and tax contributions
  • Unauthorised absences, continued lateness and unwillingness to work or comply – as long as this is stated within the employment contract
  • If you lose or damage work property such as a company phone, computer or car – again, this would need to be stated within the contract signed by both employer and employee
  • To claim back a previous overpayment of company expenses or wages

If you are considering a salary reduction for one or multiple members of staff, do some research first, read the small print and just make sure what you’re proposing goes by the book.

Issuing an unauthorised deduction could leave you (ironically) out of pocket, should the member(s) of staff choose to take legal action and exercise their own rights.

Be clear, concise and honest about your reasons

Let’s face it, nobody is going to be pleased to hear that they’re going to have less money in the bank each month but if you’re transparent and thorough with your reasoning, it will make the news much easier to swallow.

Whether it’s a legal requirement across the board or previous overpayment that needs settling for an individual member of staff, take them aside and explain exactly why you need to do this and how they should expect it to affect them.

Help them see the light at the end of the tunnel

In many cases, a drop in pay doesn’t have to be a finite decision. It is hopefully just a temporary fix to iron out any legalities or internal issues.

In order to make the process smoother and less stressful, let the employee(s) know when they might be able to expect things to revert back to normal.

If staff are aware that this isn’t a permanent fixture, they are more likely to react rationally, which will hopefully help your business avoid most of the negative consequences that come as a result of disgruntled employees.

If you’ve got any of your own pearls of wisdom on how to make issuing salary reductions to staff less stressful, leave them in the comments below or share them with us on Twitter or Facebook.

Kara Copple
An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.