The spectrum tracks questions often asked by organizational leaders.  In the next several comments here, we will visit some of those issues.  Today –

 

Can we change an employee’s pay rate?

 

This question nearly always arises when the anticipated change is a reduction.  It seems the question fades to moot when the change is an increase.  Consideration is important regardless of the direction of change.

 

The short answer:  Yes, you can change an employee’s rate of pay.  You can increase it or you can decrease it.

 

The longer answer:

 

When pay rates are evaluated, leaders do well to consider a variety of factors:

• Market competition
• The relationship of (base) pay to the value or contribution of a job to the organization
• Internal equity: relative pay rates across organizational levels, locations, jobs, etc., in terms of the skills, experience, education and other factors contributing to the value of the position.
• Applicable external requirements (including but not limited to) state requirements to provide:
  • Written notice of pay at the beginning of employment (i.e., at hire)
  • Written notice any time a pay rate is changed.

 

Under these circumstances, a general announcement of a broad pay change (e.g., an X% across-the-board change announced at an annual meeting) would be insufficient.

 

Some states’ requirements are more specific and clarify that pay rates may be changed if an individual is notified of a change prior to performing work at the new rate.

 

Of course it is critical that any rate of pay complies with applicable minimum wage and overtime pay requirements: federal and/or state.

 

Overall when considering pay rates, it is good practice to be mindful of current applicable forces: internal and external.

 

As noted in prior ‘spectrum’ writings, things change: external regulations, organizational expectations, needs and practices.

 

Information and ideas are not offered or intended as legal advice.