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Dear Seniors,
Our management have decided for salary slash for one of of employees for non performance. Can anyone provide me with a sample letter of salary reduction.
Kindly give me a sample as early as possible since i need to submit it by End of the Day.
Thanks in advance
From India, Bangalore
Dear Chaitra, Is it temporary or permanent salary reduction? If temporary talk to the employee, if mutually agreed send a mail on the same and get it acknowledge from the employee.
From India, Bangalore
dear i donot think that u can reduce someone salary for not performing upto satisfaction level.however u can take other action like warning and if not improving even termination. j s malik
From India, Delhi
Hi Harshal,
It is Salary reduction until, further notice.
Malik Sir,
We warned her several times, but all in vain. We dont want to terminate the employee as we follow the policy of Employee friendliness.
From India, Bangalore
dear chaitra but i think legally it is not acceptable and you can withhold the incements as punishment but u can not reduce salary.let other friends give their views on this point. tks j s malik
From India, Delhi
as understood from your writings, you have a policy of employee friendliness and how is it possible to slash out ones salary
as per act employer cant slash or reduce the salary whichever he is payable to an employee, instead you give him warning letter and demote him to a lower designation or hold his increments and incentives
we cant slash out what he is getting but we can demote him in the appraisal period
From India, Madras
Frankly that's the wrong way to go about the situation. If you have as you have said already warned the employee on several occasions verbally, then you need to give her a formal warning and then go on. The next best step would be to demote her as was suggested by Raam. Slashing salaries can have a tumble down effect in the organisation.
From Japan, Sagamihara
Dear Chaitra,

All the suggestions are great above. In order to no harm on this or against the law, you can change this employee to work other department.

TO: [ ]
FROM: [ ]
DATE: [ ]
We all continue to work hard here at [company] despite the downsizing that is almost certainly on the horizon. I am pleased with contributions you are making to our team.
Indeed, my recommendation that your position be changed to [lower position] is a reflection on your non performance, but rather an effort to save money in hopes of saving jobs in the long run. If you accept the change, your duties will shift from [current duty] to [new duty]. In addition, your pay will decrease [amount].
I am sure this will not appeal to you, but keep in mind that this change could help preserve the department, the company and our future as a team. I hope you will have good performance in the new role. Know that I continue to look for ways to make the situation better.
Hope this helps.
Best regards,

From China, Shanghai
please dont do this , its terribly de- motivating . you will never acheive what you are lloking for , such negative measures will only create grudges , Think about it.......
i really dont know what is your justification behind doing this.
From India, Calcutta
Thank you so much for all your replies....
We could have asked the employee to resign from her role, but we didnt wanted to do this. The management finally decided this as this was the only solution to make the employee work harder.
Labor laws also do not restrict this.
From India, Bangalore

As far as the reduction of wages are concerned; act states that these can not be reduced to reduce the liability to payoff the amount of contributions due from the employer. Moreover the definition covers the Basic Wages and excludes the followings:

(i) the cash value of any food concession;
(ii) any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;
(iii) any presents made by the employer;

In our opinion, if the management desirous to reduce the salary. It can be done without affecting the basic salary part to avoid any reduction in the contribution part and further the allowances part can be reduced.

Though itís not good to reduce the salary but where the several reminders and notices are given and no improvement noticed; one more exercise in form of salary reduction before the going to the termination, can be done.

These steps:

1. Reminders
2. Notices
3. Disciplinary Actions
4. Salary Reductions
5. Termination

Shows the wideness of tolerance of management. Any such action is sometimes required to teach the lesson to other employees.

Let us know if there any expert opinion for the above.
From India, Jaipur
Thanks for the useful info.
the organization i work with has changed the salary structure of all the employees. They have made some percent of the salary dependent on the goals achieved by the organization.
Ironcially, the benchmarking of these goals is unrealisted and way higher than what the organization is performing.
How justified is that?
From India, Delhi
Hi Santosh....This may help you....



<COMPANY NAME> believes that work conditions, wages, and benefits it offers to its employees are competitive with those offered by other employers in this industry. If employees have concerns about work conditions or compensation, they are strongly encouraged to voice these concerns openly and directly to their seniors.

Our experience has shown that if employees deal openly and directly with their seniors, the work environment can be excellent, communications can be clear, and attitudes can be positive.

We believe that <COMPANY NAME> amply demonstrates its commitment to employees by responding effectively to employee concerns.

In an effort to protect and maintain direct employer/employee communications, we will do anything we can to protect the right of employees to speak for themselves.


In order to provide equal employment and advancement opportunity to all individuals, employment decisions at <COMPANY NAME> will be based on merit, qualification, and abilities. <COMPANY NAME> does not discriminate in employment opportunities and practices based on race, colour, sex, state origin, age or any other characteristic protected by law.

This policy governs all aspects of employment including, selection, job assignment, compensation, discipline, termination, and access to benefits and training.

Any employees with question or concerns about any type of discrimination in the work place are encouraged to bring these issues to the attention of their head of the department or HUMAN RESOURCE DEPARTMENT. Employees can raise concerns and make reports without fear of reprisal. Anyone found to be engaging in any type of unlawful discrimination will be subject to disciplinary action, up to and including termination of employment.


The successful business operation and reputation of <COMPANY NAME> is built upon the principles of fair dealing and ethical conduct of our employees. Our reputation for the integrity and excellence requires careful observance of the spirit and letter of all applicable laws and regulations, as well as a scrupulous regards for the highest standards of conduct and personal integrity.

The continued success of <COMPANY NAME> is dependent upon our customer’s trust and we are dedicated to preserving that trust. Employees owe a duty to <COMPANY NAME>, its customers to act in a way that will merit the continued trust and confidence of the Public.

<COMPANY NAME> will comply with all applicable laws and regulations and expects its Directors, Managers, Executives, Engineers, and associated staff members to conduct business in accordance with the letter, sprit, and intent of all relevant laws and to refrain from any illegal, dishonest, or unethical conduct.

In general, the use of good judgment, based on high ethical principles, will guide you with respect to lines of acceptable conduct. If a situation arises where it is difficult to determine the proper course of action, the matter should be discussed openly with your immediate head of the department and, if necessary, with the [DIRECTORS], for advice and consultation.

Compliance with this policy of business ethics and conduct is the responsibility of every <COMPANY NAME> employee & associated members.

Disregarding or failing to comply with this standard of business ethics and conduct could lead to disciplinary action, up to and including possible termination of employment.


The employment of relatives or individuals involved in a dating relationship in the same area of an organization may causes serious conflicts and problems with favoritism and employee morale. In additions to claim in partiality in treatment at work, personal conflicts from outside the work environment can be carried over into day-to day- working relationships.

For purpose of this policy, a relative is any person who is related by blood or marriage. A dating relationship is defined as a relationship that may be reasonably expected to lead to the formation of consensual “romantic” relationship. This policy applies to all the employees and associated members without regard to gender.

<COMPANY NAME> has prohibition against employing relatives or known person of current employees or individuals involved in a dating relationship with current employees, we are committed to monitoring situations in work area. In case of actual or potential problems, <COMPANY NAME> will take prompt action, and this can include reassignment or transfer to other department. Employees & Associated Staff members should refrain from work place displays of affection or excessive personal conversation.


Employees have an obligation to conduct business with in time line that prohibit to actual or potential conflicts of interest. This policy establishes only the frame work with in which <COMPANY NAME> wishes business to operate. The purpose of these guidelines is to provide general direction so that employees seek further clarification on issue related to the subject of acceptable standards of operation.

Transaction with outside firm must be conducted with in the framework established and controlled by Director Level of <COMPANY NAME>. Business dealings with outside firms should not result in unusual gains for those firms. Unusual gain refers to bribes; product bonuses, special fringe benefits, unusual price breaks, and other windfalls design ultimately benefit the employer, the employee, or both. Promotional plans that could be interpreted to involve unusual gain require specific Director Level approval.

An actual or potential conflict of interest occurs when an employee is in a position to influence a decision that may result in a personal gain for that employee or far of relative because of <COMPANY NAME> business dealings. For the purpose of this policy, a relative is any person whose relationship with the employee is similar to that of persons who are related by blood or marriage.

No “presumption of guilt” is created by the mere existence of a relationship with outside firms. However, if employees have any influence or transactions involving purchases, contracts, or leases, it is imperative that they disclose to the Director of <COMPANY NAME> as soon as possible the existence of any actual or potential conflict of interest so that safeguards can be established to protect all parties.

Personal gain may result not only incases where an employee or relative has a significant receives any kick back, bribe, substantial gift, or special consideration as a result of any transaction or business dealings involving <COMPANY NAME>.


Employee may not hold any type of outside employment as long as they are associated with <COMPANY NAME> or an employee of <COMPANY NAME>.

Employee may not received any income or material gain form individuals outside <COMPANY NAME> for material produced or services rendered while performing their jobs.


The protection of confidential business information and trade secrets is vital to the interests and the success of <COMPANY NAME>. Such confidential information includes but is not limited to, the following examples:

® Compensation data
® Pending projects and proposal
® Computer processes
® Research and development strategies
® Computer program & codes
® Scientific data
® Marketing strategies
® Computer lists
® Scientific formulae
® Technological data
® Scientific prototypes
® Customer lists
® Financial information
® Human Resource strategies
® New market research

All employees and associated members are required to sign a nondisclosure agreement as pre condition of employment. Employees or associated members who improperly use or disclose trade secrets or confidential business information will be subject to disciplinary action, up to and including termination of employment and legal action, even if they do not actually benefits from the disclosed information.
From India, Bangalore
Dear Chaitra,
I realize your urgency, however such decisions needs to be taken with lot of caution as it could get the employer in trouble.Hence i recommend you to consult your labor consultant because i feel that an employer is not permitted to decrease the employees basis salary since it will result in deduction of PF Contribution.
And as per my understanding ,the PF authorities do not allow reduction in the PF contribution.It can only be discontinued in case of employee resignation/termination or trasferred from one employer to another.

Hi CHitra,
I fully agree with your decision. When we hire an employee for a middle management / senior management position with high salary on par with the market, we expect that individual to perform the required roles and responsibilities for that particular position justified to his / her salary.
Later his / her direct Manager observes that he / she is not able to perform up to the mark inspite of several trainings / warnings, it is advisable to demote them with lower salary grid which is always better than terminating them in this current market condition!
May be, you could propose them 2 options from HR either voluntary resignation or continue in service with new designation and salary.
i do not think, you need to specify this in policy up front as it is welll understood by "performance management system" -- ie. pay for your performance!
hope this helps you to take a decision.
best regards,
Head HR
From India, Madras

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