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.