Navigating Salary Cuts: Can We Legally Offer Half Pay During a Financial Crisis?

Seeking Guidance on Employee Salary Adjustments During Financial Crisis

Is there any law, model, or theory through which, due to a financial crisis, we can ask our potential employees to accept half salary for a certain time period? We need terms and conditions.

Is there any way, by paying half salary or less, we can ask them to stay at home until required to work?

Retaining employees is very challenging for an HR person. If we are offering half salary or less, there is no chance to retain them for a long time. In this case, I suggest encouraging employees to work on their own and make them feel they are part of the organization. Engage in activities that promote employee engagement. Inform them about what's happening in the organization, such as financial crises. A good employee will stay and work, while a not-so-good one will leave even if paid well.

Most importantly, recruit employees who are eager to work, not just for the salary.

Regards

Where are you located - India or Pakistan? The appropriate laws will then apply. However, in general, it all depends on how the employees were treated while things were good. If they were treated well, then you can speak to them - as a group or department-wise [suggest avoiding individual meetings to begin with - else you will be seen to be playing politics] and explain the situation. How the employees take it depends a lot on how much they 'connect with the organization' - which in turn depends on how they were treated thus far (reason for my first line).

Existence of Formal Practices

Coming to whether such practices exist formally, they do in many countries - including India - especially in the IT sector.

Legally speaking, I don't think (though I will stand corrected on this score) there would be anything to bar an organization from resorting to half-pay when the financial condition is really bad and agreed upon by most of the employees. However, such practices will have to be a part of other steps by the organization. For example, if the employees are retained on half-pay and the directors go on foreign junkets or there's perceptible wastage of scarce resources within the other functions of the company - you know the end result.

All the best.

Regards,
TS

It is more important to follow the actual laws. Motherhood statements will not work here. As per laws, it is very clear that the facilities once given cannot be withdrawn. Also, one gentleman nicely quoted that as per the provisions of the EPF Act, salary once given cannot be reduced. You can reduce salary amicably, but if any one of them lodges a complaint with the competent authority, your organization will be in trouble. It would be good if you could settle the matter amicably with the employee, but please do not escalate it legally.

Regards,
Kamal Datta
[Phone Number Removed For Privacy Reasons]

The question is: is the financial crisis affecting just your firm, firms in your industry, or the country in general? If it is the latter two, then the workers will not be able to find other jobs easily and may accept the proposal. For example, see [Recession forces a million to work part-time - Telegraph](http://www.telegraph.co.uk/finance/recession/5866522/Recession-forces-a-million-to-work-part-time.html)

There is no law supporting your cause of giving employees reduced salaries for any reason whatsoever. However, if your company is in utter financial strains, it has to take employees into confidence regarding the financial strains it has been experiencing. While convincing them of this situation, the company should halt the outsourcing of jobs and instead assign them to the company's employees. Once employees are convinced of the genuineness of the problem, they can be persuaded and offered reduced salaries for a specified period after entering into a formal understanding with them on record.

Such problems are frequently encountered in sugar mills and have also occurred in some industrial organizations in the past. However, you will have to work hard on this.

Regards,
S.K. Johri

Thank you for all your views. I apologize for the delay from my end. We have discussed the scenario with our highly paid employees, and we have retained a few of our staff on the same salary. However, we have taken back some benefits, and a few of them are currently in search of new jobs as we may not be able to retain them for much longer.

Thank you for your understanding.

Best regards