Can a Company Cut Your Pay or Hours?
Before starting any job, it is crucial that you know your rights.
There is a saying claiming that you either fulfill your dreams, or somebody else’s.
This sound quite motivating and encouraging for people who know there is entrepreneurial blood running through their veins, but for those who just don’t feel ready to start a business, or simply prefer less stress and choose to work for somebody else, there is a great deal about working hours and payment.
Since employees are not the ones who determine how long they will be working or how much they will be paid, it is important that they know their rights and be completely aware of what might happen, so they can be prepared and not suffer great losses.
If you are one of the people who is employed in a big company, working for somebody else, this is the perfect article that can help you get familiar with your rights regarding pay or working hours cut.
We’ll go through all possible scenarios and teach you how to protect your rights and make the best choice.
As unfortunately, in most cases, the company can choose to cut your pay or hours.
WHAT EXACTLY DOES THE PAY CUT MEAN?
Simply said, a pay cut is employee’s reduced salary, and it can come in many forms.
The most obvious one is when employees start receiving less money on the same job they’ve been doing.
It is usually explained by employers as a way to deal with difficult times and struggles the company is going through, without having to reduce the number of employees.
A notice about pay cut can come quite shocking to the employees, especially if they were expecting a promotion and pay raise.
On the contrary, if the pay cut actually happens, it could lead to lowering the obligations at the company and many would consider it as a regression.
Employers tend to reduce the amount of the job as they take it to be fair regarding the pay cut, but also as they are trying to reduce total costs of the company and eliminating everything that is unnecessary.
On the other hand, a pay cut can be experienced in another way, too.
Even though it wouldn’t be felt as hard as the direct pay cut would, not getting the bonus, a raise or any other desired benefit due to financial struggles, is also considered as the pay cut.
As mentioned before, it is not harshly felt like the direct pay cut, but can lead to huge dissatisfaction amongst excellent employees that have been expecting the raise or a bonus.
IN WHICH SITUATIONS CAN A COMPANY CUT YOUR PAY?
The company can choose to cut your pay without any reason.
Of course, this doesn’t happen just like that and it can’t be proceeded without your agreement.
The most common reason for a company to cut employees’ pay is due to financial struggles. However, there can be other reasons the company finds important.
No matter what the reason is, one thing is sure – you need to be notified about the pay cut.
This means that the company management needs to let you know about the pay cut.
It usually happens in person, or through a letter or an e-mail, explaining the reason behind the pay cut, % of the cut, expected period of the pay cut duration and actions that will be taken to improve the situation.
The most important thing about the notice is the call upon agreement of the lower salary.
It is mandatory that the employee agrees on the pay cut, for it to be official.
WHAT DOES THE LAW SAY?
This is the most important thing.
No matter what you or your employer thinks or finds suiting, it is about what the Law says.
And if we check the Law about the pay cut, we can find the following:
1. A Notice About the Pay Cut
A pay cut cannot occur without the employee previously being notified about it.
2. The Rule of Forward
If the pay cut happens, it can be applied from that moment on.
For everything that you have done in the past, you are allowed to be paid on the last agreed salary.
3. Minimum Wage
The salary can be reduced, but not lower than the minimum wage in your state.
If you are under the individual or union contract, it might be that you are protected from the salary reduction during the period stated in the contract.
If it happens that your pay cut comes on discrimination bases (race, age, sex or any other form), it is your right to demand to be paid fairly and employer’s obligation to do so.
6. Public Policy
If you need to take the time off the work due to jury duty, National Guard or similar, you are protected for the pay cut by the Law.
If it happens that you report your boss or manager for any form of disturbance or harassment and it results in your pay cut, that is against the Law.
WHAT CAN YOU DO IF YOU DON’T WANT TO ACCEPT THE PAY CUT?
Of course, you can decline the pay cut.
Does that mean that you can still keep your job?
Well, no. the only other option is to quit.
As all employers are aware of this possibility, they are ready to accept the same pay cut themselves, in order to keep all the employees and continue with the work, as it is the only way to break out of the difficult situation.
If you don’t find your new salary rewarding enough, you can choose to say no and quit.
Make sure that you have plan B before quitting, and take into consideration how much time would it take you to find a new job where you would be paid as much as you believe that you should.
The decision is always up to an employee.
Another thing that you could do is speak with your managers and see if there is any other solution.
For example, if there are some non-financial benefits that you would find as a compensation for your pay cut, your bosses might agree about that, especially if they find you valuable.
But most importantly, they will agree only if it doesn’t slow the company’s strive for recovering.
SOME GOOD REASONS YOU SHOULD ACCEPT THE PAY CUT
As you got the notice about the pay cut, your first reaction was probably the shock, and then after that – anger.
At least, that is how most employees react and we understand why you feel that way.
But if you consider accepting the pay cut, and think about the good things that can come out if it, you’ll realize that this isn’t as bad news as you initially thought.
1. Keeping the Job
What sounds better to you, being paid less or not being paid at all?
For most of the people, it’s the first option.
Although you might find it offensive to be paid less than you deserve, you have to think about how much would you be paid somewhere else, and how much time would it take you to find that “somewhere else”.
Many people don’t consider this when deciding and end up being unemployed for longer than a year or starting at the new company with an even lower salary.
In the end, if you really want to change the company, you can do it later, after you explore all your options and find a suitable one.
2. Changing the Job
This is a bit different situation and it might not happen in the company you are currently working for.
For example, if at some period of life you discover that your job is completely unfulfilling and makes your miserable, it might be a good time to start looking for a new one.
If you are not completely qualified for the career change, you will probably be offered the lower salary than you were used to.
Although the situation is not ideal, it is much easier to replace the lack of money than to make up for the dissatisfaction that reflects on all areas of our lives.
It is hard to believe, but agreeing for a pay cut can actually help you progress.
How is it even possible?
Well, pay cuts come often with a reduced amount of work or even changed the job description.
If that happens, it means that you have a possibility to learn new skills and become component in other areas of business.
Long term speaking, it can lead to opening new opportunities for you, that wouldn’t be possible if it weren’t for a pay cut.
Another good thing is that the company will most probably be thankful to all the employees who chose to stay and will want to reward that the minute they are able to.
Also, this could be a great break-through for you, if you focus on helping the company to get out of the difficult situation.
If it happens that you know what to do to contribute to it, trust me – you will become the hero of the company.
4. Work-life Balance
It feels good to have a great job with an even greater salary, but one must ask themselves – is it really worth it?
There are many stories about famous and successful people claiming that they are miserable and suffering and that the money they are earning is not a remedy.
It might sound ridiculous to you, especially if you are in a place where you are imagining all the things you would do only if you had more money.
Hate to burst your bubble, but those things that you are dreaming of do not come from earning more money.
Everything you want to do can be done with exact amount you are earning now, even if you were earning less.
So accepting the pay cut might not be the worst thing in the world, on the contrary – it could help you focus more on your private and social life, especially if the pay cut comes with less working hours.
It has been scientifically proven that human beings are social beings and can’t be satisfied with material things only.
5. Reducing Stress
The pay cut can come with different job requirements, often easier than you were used to.
Sometimes, it can be a good thing, especially if you are not the biggest fan of your work.
This can often be seen in higher positions, where managers and other employees are required to do the things they are not proud of, for the good of the company.
Getting that promotion and the raise felt amazing, but now as you’ve been in this job for a longer time, you realize that you don’t like it that much.
The pay cut can be an excellent opportunity for you to change what you are actually doing.
If you are still wondering would you miss your money – the answer is probably not.
You will be too busy being thankful for peaceful nights and carefree dreams.
ANOTHER FORM OF THE PAY CUT: REDUCED HOURS
Wow, as getting the pay cut in the form of reduced salary wasn’t enough!
Exactly, the pay cut might not come regarding the salary directly, but it will initially influence your working hours (which will result in reduced salary).
Now you are probably wondering in which situations this can happen and what that actually could mean for you.
For the starters, you should know that it depends on whether you are an hourly (nonexempt) employee or a salaried (exempt) employee.
1. An hourly (nonexempt) employee.
If you belong to the category of the hourly paid employees, you should know that your employer has complete right to cut off your hours.
Good thing is, that they still have to pay you for each hour that you work.
Bear in mind that cutting off the working hours does not mean that the amount of your work will be reduced, and that is something you should pay attention to.
If you are still getting the same amount of work, it might be that your employer is expecting you to fasten up and be able to complete everything in the less period of time.
Sometimes, it might be possible, but make sure that you are not taking your job home and working over there because you will not be paid for it.
You can choose to talk with your employer about that (as it is illegal and you have the right to), just make sure to show them how valuable you are to them.
They still have a possibility to hire someone new and set the expectations with them so that they finish the job in the estimated time.
2. A salaried (exempt) employee.
You are a salaried (exempt) employee if you are being paid equally each week, no matter how much you work (how many hours).
However, the fact that your salary doesn’t depend on your working hours, does not mean that it cannot be reduced.
Your employer has the right to reduce your working hours per week, which is followed by reducing your salary.
Bear in mind that this is possible only if the reduction is consistent for an estimated period of time. In other words, your salary cannot change from month to month.
It can only be changed if the reduction is unique and you receive each month the same amount of money.
Also, you have the right to know for how long this will be the case before accepting the reduced working hours and lower salary.
The companies need to follow the rule of reduction that states that they cannot lower your wage beneath the wage minimum.
Before accepting the change, make sure you check the hour and wage rate in your State and see if you are being paid fairly, as it is your right.
What would happen if your employer approached you stating that you have to take a day off? How about a week? A month? Or an entire year off?
These mandatory furloughs happen often and they are, as the name states, not optional.
Simply said, a mandatory furlough is time off work without pay (or in some cases with a partial pay).
Even though the time off sounds good and relaxing, the fact that it comes with reduced or no pay does not sound good for the employees.
This is another way for a company to save money and retain all employees.
What is typical for mandatory furloughs is so-called “no work rule”.
It means that employees aren’t allowed to work at all, as for everything they do during the furlough, they have to be paid.
If your first thoughts after receiving news about the furlough are “Great, now I will use this time to find a new job!”, make sure that your employer actually allows you to look for and start doing a new job while on furlough.
These things might even be stated on your hiring contract.
Lastly, this might be a good thing for you, as you will have more time to dedicate yourself to the things that matter to you the most.
Maybe even figure out whether the current job or the current company still suite your, or is it time to look for something better.
WHAT CAN YOU DO IF YOU FIND OUT THAT THE PAY OR WORK HOURS CUT WAS ILLEGAL?
We’ve talked about the Law and so far you are probably aware whether the pay or working hours cut is or was legal.
Now we’ll talk about your next steps if it was illegal.
If you have found out that it is illegal after you have quit, you can file a complaint to the State Department of Labor.
Make sure you collect all facts and present the situation in the best possible way.
If you just got a notice about the pay cut and you have realized that is not legal before saying anything, you need to talk with your boss as soon as possible.
For the starters, it might be that there was an honest mistake and that actually any laws weren’t broken.
Another possibility is that your boss isn’t aware of some Law.
In that case, explain the situation and propose an agreement.
They will probably agree on it, as they do not want to get the company in even more struggles.
Lastly, if it happens that the company intentionally chose the exact pay cut for you and do not want to change their mind, it is time to call the State Department of Labor and ask for their help and protection.
WHAT TO DO IF THE COMPANY CUTS YOUR PAY OR HOURS?
These things can happen quite often.
To be prepared, here are some things you can consider doing in such situations.
- Be proactive and take advantage of the situation. Look for ways to help your company and therefore, help yourself progress and get not even to your regular salary, but even earn a raise or bonus.
- Adjust yourself as soon as possible to reduced working hours. This means to find something new you will be doing in those hours, as well look for ways to become more efficient at the work so you still complete everything you have to do, even though your working time is reduced.
- Use mandatory work off smart. Look for new projects or maybe even a new job. Just make sure you aren’t violating anything stated in your hiring contract.
- Consider working for a smaller company or even starting your own business. You will have more insights (or complete) in finances and have more say about your salary.
- Trust your instincts. How does this pay cut feel? Is this a bad thing or a good thing? Don’t choose something just because it feels safe or because it’s everyone’s choice. Find what suits you the best in this situation.
Whether you are facing a pay or work hours cut, we know that the feeling is not quite pleasant. This shouldn’t discourage you as there are many possibilities laying in this.
Make sure you check all your options and choose what suits you the best.
Law can offer you many answers but don’t forget to check your hiring contract, too. If necessary, ask an attorney or somebody from HR department to help you out with understanding your rights.
And if it happens that the employer is entirely allowed to cut your pay or working hours, just remember that this kind of things happen and that is not the worst things in the world.
Many successful people have fought with this and still found their way to prosper.
For example, there is a high chance that your boss or a manager also suffered from pay cut back in the days. And look at him now!
Lastly, don’t take it personally. Especially if the pay cut has been applied to all employees.
The managers are just trying to do what’s best for the company and in some way looking for a solution so you and your colleagues can keep your jobs.
Try to remember everything you like about the company and each time they did something for you.
Now it’s your time to be the hero.
Remember, the path to greatness isn’t an easy one, but it is definitely the one worth taking!
Welcome to the 15th episode of our podcast! You can download the podcast to your computer or …