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Has anyone been on the other side of this? As an employer, is termination the only option when an employee's compensation exceeds their contribution? It seems

Has anyone been on the other side of this? As an employer, is termination the only option when an employee's compensation exceeds their contribution? It seems like there's no good way to demote somebody.

Kranar 4y ago
In Ontario, Canada, you can absolutely reduce someone's pay and/or demote them without cause, but you must do so with notice. That is you can't immediately reduce someone's pay on the spot but instead have to inform them that their pay will be reduced after X weeks (based on statute but usually 1 week per year of employment) and continue paying them their current salary for those X weeks. Only if you have cause can you instantly demote them and/or reduce their salary, but establishing cause has a fairly high standard and is usually not worth it outside of obvious cases. It's usually just best to wait out the notice period. As for me, my personal opinion is it's never worth it to demote someone or reduce their pay. I always prefer terminating someone over those options.
pjc50 4y ago
How have you got into that situation, though? If someone's performance has gone down => performance improvement plan (PIP); gives them an opportunity to improve again, and requires you to document their performance. Contribution gone down due to inability to assign them profitable enough work => redundancy process. This may include offering them a non-redundant position that has lower compensation. You can't just demote people because you think you have more power over them and you want to improve your quarterly results.
TheCoelacanth 4y ago
It's important not to read too much into this decision. Employers are allowed to reduce pay, just if the employee chooses to leave as a result of that, then it's legally treated as if the employer fired them. Normally, that would just mean that the employee would qualify for unemployment benefits and the employer's unemployment insurance premiums might increase by a trifling amount. In this case, the employee had a contract guaranteeing severance pay, so the employer also was liable for that.

Kranar 4y ago

In Ontario, Canada, you can absolutely reduce someone's pay and/or demote them without cause, but you must do so with notice. That is you can't immediately reduce someone's pay on the spot but instead have to inform them that their pay will be reduced after X weeks (based on statute but usually 1 week per year of employment) and continue paying them their current salary for those X weeks. Only if you have cause can you instantly demote them and/or reduce their salary, but establishing cause has a fairly high standard and is usually not worth it outside of obvious cases. It's usually just best to wait out the notice period. As for me, my personal opinion is it's never worth it to demote someone or reduce their pay. I always prefer terminating someone over those options.

pjc50 4y ago

How have you got into that situation, though? If someone's performance has gone down => performance improvement plan (PIP); gives them an opportunity to improve again, and requires you to document their performance. Contribution gone down due to inability to assign them profitable enough work => redundancy process. This may include offering them a non-redundant position that has lower compensation. You can't just demote people because you think you have more power over them and you want to improve your quarterly results.

TheCoelacanth 4y ago

It's important not to read too much into this decision. Employers are allowed to reduce pay, just if the employee chooses to leave as a result of that, then it's legally treated as if the employer fired them. Normally, that would just mean that the employee would qualify for unemployment benefits and the employer's unemployment insurance premiums might increase by a trifling amount. In this case, the employee had a contract guaranteeing severance pay, so the employer also was liable for that.