We recently restructured (reduced) the salary of an employee since the employee's performance was not up to par. We did not put the employee on a performance improvement plan; instead, based solely on the feedback of the employee's manager, we reduced the salary. The manager did not share his negative feedback with the employee. Now, the employee is asking why his salary was reduced. Is there anything wrong with what we did?
From India, Hyderabad
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From India, Hyderabad
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Mounika,
Reduction in salary is a punishment. Before awarding any punishment, a domestic enquiry must be conducted. If no enquiry is conducted, at least a show cause notice has to be given. Your company has given short shrift to these principles of natural justice and resorted to autocratic behavior of instant justice. The incident shows that even after 71 years of independence, the essence of democracy has not percolated down to the ordinary citizens of India.
Reduction of the salary is the last step. Before that, the proper administrative procedure has to be followed. Employees work for money. Their salary is similar to the cash flow of a business organization. Based on this anticipated cash flow, they plan their investment, expenses, and other development activities. If you reduce the salary all of a sudden without informing the employee why it is being done, it is as good as snatching food from someone's mouth.
You have reduced the salary, but have you thought about the fear psychosis that this incident will create in the minds of other employees? The incident has the power to make employees lose faith in the administration. This loss of faith could foster employee attrition.
To remedy the situation, you need to overhaul the "Policy on Performance Appraisal." At the beginning of the performance cycle, you must hand over a KRA sheet or goals that the employee must meet. At the end of the performance cycle, the employee should be given a chance to prove whether they have met their goals. Ratings should be based on the evidence available from both sides, the Manager as well as the employee. The employee's signature must be taken on the KRA sheet at the end of the performance review. This acknowledgment helps in communicating to the employee where they stand in terms of performance. For poor performers, it is not wrong to place them under a Performance Improvement Plan (PIP), but it has to be communicated through an official letter.
In the policy, you need to define what constitutes poor performance. Additional definitions should cover what is average, good, very good, and excellent performance. The policy must be communicated well in advance or during the induction training.
When an employee performs poorly, the manager is expected to guide or coach the employee. Has your manager done that? How much time does he spend with the poor performer to elevate their performance?
Thanks,
Dinesh Divekar
From India, Bangalore
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8036Reduction in salary is a punishment. Before awarding any punishment, a domestic enquiry must be conducted. If no enquiry is conducted, at least a show cause notice has to be given. Your company has given short shrift to these principles of natural justice and resorted to autocratic behavior of instant justice. The incident shows that even after 71 years of independence, the essence of democracy has not percolated down to the ordinary citizens of India.
Reduction of the salary is the last step. Before that, the proper administrative procedure has to be followed. Employees work for money. Their salary is similar to the cash flow of a business organization. Based on this anticipated cash flow, they plan their investment, expenses, and other development activities. If you reduce the salary all of a sudden without informing the employee why it is being done, it is as good as snatching food from someone's mouth.
You have reduced the salary, but have you thought about the fear psychosis that this incident will create in the minds of other employees? The incident has the power to make employees lose faith in the administration. This loss of faith could foster employee attrition.
To remedy the situation, you need to overhaul the "Policy on Performance Appraisal." At the beginning of the performance cycle, you must hand over a KRA sheet or goals that the employee must meet. At the end of the performance cycle, the employee should be given a chance to prove whether they have met their goals. Ratings should be based on the evidence available from both sides, the Manager as well as the employee. The employee's signature must be taken on the KRA sheet at the end of the performance review. This acknowledgment helps in communicating to the employee where they stand in terms of performance. For poor performers, it is not wrong to place them under a Performance Improvement Plan (PIP), but it has to be communicated through an official letter.
In the policy, you need to define what constitutes poor performance. Additional definitions should cover what is average, good, very good, and excellent performance. The policy must be communicated well in advance or during the induction training.
When an employee performs poorly, the manager is expected to guide or coach the employee. Has your manager done that? How much time does he spend with the poor performer to elevate their performance?
Thanks,
Dinesh Divekar
From India, Bangalore
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Dear Mounika,
This is to sum up what our learned friend Dinesh has elaborated on regarding transparent performance appraisal and fair disciplinary action.
If the immediate controlling authority has recorded a dissatisfactory note about the performance of his subordinate employee, it is the duty of the reviewing authority to analyze whether his findings are objective with reference to the standards of performance set down by the organization or mere subjective negative remarks devoid of any corrective measures from his end. Even if the assessment is true, it is your duty to communicate the adverse remarks to the employee and obtain his explanation before deciding the further course of action.
Reduction in rank or reduction in existing salary is a major punishment likely to be awarded only in case of serious misconduct. Irrespective of the gravity of the misconduct or the nature of the punishment, the Principles of Natural Justice have to be followed by the disciplinary authority before awarding any punishment. Your post shows that you have simply acted upon the negative feedback of the reporting manager. Therefore, my suggestion would be to keep the payment reduction orders in abeyance and put the employee on PIP.
From India, Salem
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This is to sum up what our learned friend Dinesh has elaborated on regarding transparent performance appraisal and fair disciplinary action.
If the immediate controlling authority has recorded a dissatisfactory note about the performance of his subordinate employee, it is the duty of the reviewing authority to analyze whether his findings are objective with reference to the standards of performance set down by the organization or mere subjective negative remarks devoid of any corrective measures from his end. Even if the assessment is true, it is your duty to communicate the adverse remarks to the employee and obtain his explanation before deciding the further course of action.
Reduction in rank or reduction in existing salary is a major punishment likely to be awarded only in case of serious misconduct. Irrespective of the gravity of the misconduct or the nature of the punishment, the Principles of Natural Justice have to be followed by the disciplinary authority before awarding any punishment. Your post shows that you have simply acted upon the negative feedback of the reporting manager. Therefore, my suggestion would be to keep the payment reduction orders in abeyance and put the employee on PIP.
From India, Salem
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Dear Mounika,
You cannot reduce the salary of an employee if both the employer and employee are under a contract. Your term "restructure" is not legal as it has no sanctity in the eyes of the law. Instead, the aggrieved employee should raise an Industrial Dispute against your inhuman treatment as he/she is in a rightful position.
Your term 'restructure' falls under the category of 'Change in Service Conditions'. The Industrial Disputes Act, 1947 (the Act) governs such arbitrary reductions in salaries/wages of employees. Section 9A, as read with Schedule IV attached to the Act, provides that any such reduction in salary/wages or work time or days will amount to a change in conditions of service. According to the Act, no such change can be effected without furnishing concerned workers with 21 days notice prior to such change.
Even if such notice is provided, the employees likely to be affected do have an option to refuse to accept such changes. They can raise an industrial dispute challenging such a change in the condition of service.
From India, Mumbai
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You cannot reduce the salary of an employee if both the employer and employee are under a contract. Your term "restructure" is not legal as it has no sanctity in the eyes of the law. Instead, the aggrieved employee should raise an Industrial Dispute against your inhuman treatment as he/she is in a rightful position.
Your term 'restructure' falls under the category of 'Change in Service Conditions'. The Industrial Disputes Act, 1947 (the Act) governs such arbitrary reductions in salaries/wages of employees. Section 9A, as read with Schedule IV attached to the Act, provides that any such reduction in salary/wages or work time or days will amount to a change in conditions of service. According to the Act, no such change can be effected without furnishing concerned workers with 21 days notice prior to such change.
Even if such notice is provided, the employees likely to be affected do have an option to refuse to accept such changes. They can raise an industrial dispute challenging such a change in the condition of service.
From India, Mumbai
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Dear Mounica,
The action of the reduction of the employee's salary in the name of restructuring of salary is void ab initio, i.e., void at the option of the aggrieved employee. The action taken was nothing but disciplinary action without following the due procedure. As rightly said by our colleagues, a reduction in salary is a major punishment that can be awarded only in serious cases, for which it is to be proved beyond a reasonable doubt after a thorough inquiry that the performance of the employee has come down.
It seems that the principles of natural justice were not followed in your case. Hence, you are advised to roll back the decision.
Regards,
D. Phani Kumar
General Manager - HR
Heidelberg Cement India Limited.
From Singapore, Singapore
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The action of the reduction of the employee's salary in the name of restructuring of salary is void ab initio, i.e., void at the option of the aggrieved employee. The action taken was nothing but disciplinary action without following the due procedure. As rightly said by our colleagues, a reduction in salary is a major punishment that can be awarded only in serious cases, for which it is to be proved beyond a reasonable doubt after a thorough inquiry that the performance of the employee has come down.
It seems that the principles of natural justice were not followed in your case. Hence, you are advised to roll back the decision.
Regards,
D. Phani Kumar
General Manager - HR
Heidelberg Cement India Limited.
From Singapore, Singapore
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