Visits Along the Spectrum between “Can we?” and “Do we have to?”

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.