Hi Nitin,
Suspension & forced leave are two different things...
Suspension can be used against a misconduct, violation or breach of policies, only when other means of counseling statements have been exhausted. Immediate suspension can also be possible, when the misconduct results in loss of trust, or any further damage is anticipated. Suspension is generally "unpaid" & followed by an domestic or legal enquiry. Suspension on full pay can also be used when an employee needs to be removed from the workplace to avoid prejudicing an investigation. This is used not as a punishment, but in the employer's best interest.
If you want to compensate the suspension against the earned leave days, then it is 'forced leave'. This is an adjustment accepted by employee, as the suspension is not shown on his record, as well organization is clean since the leave application is made to be filled up by employee. Such leaves are useful, when there is no real work available to the employee & company has no other choice than to 'lay off' employees.
With neither action, the "efficiency" of the employee would show any upgrade after the suspension. His priorities & dedication towards job may increase, but not his productivity & work accuracy. At the same time, his interest in the job may diminish with this suspension. You need to first find out on which aspect the employee is really lacking. Also think if you can motivate him further by inducting trainings or suggesting different opportunities to show good performance (May be change of department?).
If after all, the employee is really an underperformer, then why don't you just ask him to leave? May be this is not the suitable job for him, or he is not the suitable candidate for your organization...
Demotion with salary decrease is not a good move for company as well as for the employee. Demotion just increases dissatisfaction at both levels.... Alternative is to let the person go & hire someone with less salary at the junior level. Here issue is not only the employee performance, but the promotion policy of the company in the first place.
Best Regards,
Amod Bobade.