Is Cutting an Employee's Salary Fair for Performance Issues? Seeking Advice from HR Peers

Hello everyone,

Is it correct to reduce an employee's salary due to performance issues?

Is it correct on the employer's part to reduce an employee's salary by a certain amount when their performance is lacking? No warnings have been given to date, but in a couple of discussions, we have mentioned that his results are low even though he's been putting in a lot of effort. He works overtime, works really hard, but his results are not up to the standards we expect. We have been pushing him all this time, but we can no longer afford to do so (It's been six months of his service with three months of probation). We are looking to hire a more experienced person who can assist and guide him if he wants to learn and continue with us because we do not want to terminate him.

Seeking suggestions on handling performance issues

Do you think reducing his salary will be a good option, or is there anything else we can do? Suggestions, please?

Regards, Aishwarya HR

Dear Aishwarya,

Generally, the performance of the assigned work/job within the time frame has two facets: one is quantity, and the other is quality. In both cases, it can be evaluated by means of a systematic performance appraisal only. Particularly, when the nature of the work has a more quality orientation, the appraisal system should be such that subjective considerations or inferences are minimized to the extent possible by setting clear-cut parameters of assessment. When the performance of the work can be better assessed quantitatively, the appraisal becomes relatively easier and more exact, giving no room for any subjective considerations. Consistent poor/low performance of an individual employee has a devastating impact not only on his career but also on the effectiveness of the team concerned. Of course, when the particular employee's performance is continuously on the ebb, the management can resort to a proportionate wage cut. But a reduction in his salary is a punitive action that requires compliance with the principles of natural justice before inflicting such a punishment.

Umakanthan Sir, thank you very much for your response. Also, if you can let me know in brief how to come up with a clear-cut quality-based assessment for evaluating his appraisal, that would be great.

I have prepared an appraisal form that outlines the core responsibilities of the employee, work demands, objectives, performance areas, and result areas for self-appraisal and supervisor's appraisal. Is that good enough? Will it be as you mentioned?

Adding on to the previous message, sir, performance appraisals are done after the employee completes a year, aren't they? The employee has only finished 6 months. However, we know it's not happening. No matter how much we push, he's not able to meet our expectations. We cannot afford to keep paying him for the work he's been doing and wait until his appraisal time. We need to decide something in a month or two. We have been losing projects because he's not yet skilled enough to handle them. We cannot afford an experienced one and still retain this employee. We don't want to fire him and be that harsh. That's why we thought of reducing his salary and accommodating two.

What's your opinion, sir?

Dear Aishwarya, Umakanthan has given you some advice based on the limited information that you have provided about the scenario. You need to give more information to receive concrete advice.

Questions to Consider

What is the nature of the person's work? Has he or she any previous experience in doing similar work? If not, have you provided any training? You say that he or she does not meet your expectations. Are your expectations too high? What methods have you used to set his or her targets? In some companies, the targets are set very high.

The more information you provide, the better the advice you will receive.

Employee Performance and Salary Reduction

He's working as a web designer and developer. He had 2.5 years of experience when he joined, and now it's 3 years. He was working in the same position earlier too. A few months ago, he was working on a client project, but we lost the project because he couldn't meet client expectations. Now, he is working solely on our company's website. He's now being spoon-fed. He lacks creativity and is very dependent. Until you instruct him to do something, he wouldn't do it on his own. We have to monitor his every move. Quality is affected if you let him do things independently. He lacked designing skills for our website even after repeatedly being told how it should be. So, the MD started developing the web design himself to assist him, and he should only develop it. Now he lacks in development too. He takes a lot of time, and even the smallest tasks are left undone until we monitor them. For example, even to erase a line, we have to tell him, or else he won't do it.

I tried talking to him to understand where he's lacking support or knowledge and also advised him to gain additional knowledge in areas where he's weak. His reviews were low, and in many discussions, we have told him that we cannot continue at this pace. In fact, we are losing time attending to him every minute. When asked, he says it's challenging for him, but he knows how to do it, yet it takes time. A little time is fine, but it's already been months now. If this is the process he wants to continue with client projects as well, we cannot proceed.

We are giving him tasks where he's knowledgeable, but still, he cannot cope with them. We cannot spoon-feed anymore. That's why we arrived at this situation. I feel cutting down on wages is worse than firing a person. But we really do not want to fire him; instead, cut down salary, bring in a more experienced person, put him under their training, and lift him up if he's going to agree to this.

What do you think, sir?

Dear Aishwarya,

Look at the other side of the coin too when weighing and executing the above suggestions. Why is an experienced candidate with similar job knowledge of 2.5 years not performing at your workplace?

1. Check the work environment dynamics starting from infrastructure provided (seating arrangements), tools for his productivity (system, software, internet), and most importantly his colleagues, peers, reporting line, and instructor. Is something bothering or obstructing his performance?

2. As an HR professional, you cannot micromanage each and every employee in the company. Engage a buddy system when a new person joins the company, who will constantly guide and guard him and help in his orientation in the company. This buddy would in turn give feedback to HR on the initial journey of the new employee for a fixed time period.

3. If you want to give the employee another chance, as HR, you could engage in some employee engagement activities, speak to him, and probe if his personal/family/friend areas are diverting his attention, which can be resolved externally. By reducing salary, you are creating an additional emotional burden for the employee. It's better to give him three warnings and then terminate him, so he can seek another job with equivalent remuneration.

Thank you.

I have gone through the thread very carefully and thought of putting up the following lines for you to note, please:

1) Let me first understand your process of selection and HR observation of the employee. He must have been selected through an interview process. Was he tested on his capacity for imagination and creativity? Or, was he at least communicated the employer's expectations regarding his capacity for imagination and creativity?

2) Was he mapped on the "Career Graph" offered by the employer, with increasing expectations (job requirements) on imagination and creativity at each stage on the "Career Graph"? I believe this should have been an essential part of the interview process, and if not done, you were likely to face this setback.

3) From what I gather, the concerned employee is a web designer and developer. If I am not mistaken, given the fast-changing world of IT, continuous knowledge upgrading is crucial for such employees. Does your organization have a system in place for this?

4) Do you, as the employer, believe that guiding the employee onto the right career path, educating them on employment essentials, and providing guidance along the way are also the employer's responsibilities?

5) Do you think it is not a wise practice to attract an employee from another organization without ensuring they match the job requirements?

I apologize, Aishwarya, any arbitrator would argue that "reducing the employee's salary" on the grounds of "non-performance" is not justified if your responses to the above questions do not reflect good intentions.

Regards, Soumitra Sengupta

Dear AM, we need to look at both sides of the coin before taking the punitive action of pay reduction. Please also take into account the statutes and the relevant bye-laws.

Performance appraisal considerations

The performance appraisal, by definition, comes after one year. Whatever the reasons are for the staff's low output/performance, have they been provided the necessary facilities for skill building and development to match the job's needs at the company's 'satisfactory' level? All such 'measurements' are too vague. Also, remember all learners and task performers are not equally proficient. Though performance appraisal has become a very definite science, it is relative and often subject to a lot of subjectivity.

Management's responsibility

The onus at this point lies on the management to help train the employee with skills development within a given timeframe, and then consider upgrading or firing the employee.

Regards,

Arif ur Rehman Karachi

Dear Soumitra,

Recruitment Process and Employee Evaluation

Here are the answers to your questions:

1. The process of recruitment was followed, but his capabilities weren't tested as we had to fill the position very urgently and had a limited number of good resumes. However, the employer's expectations were communicated, and a detailed technical discussion took place. Although he wasn't excellent, he was much better than the others for the cost we had. We always believe in grooming employees to help them perform better.

2. Yes, he has been placed on a career path and given a clear picture of his job requirements.

Need for Upgrading Skills

3. I agree that upgrading needs to happen. Since we are a start-up, we cannot offer him courses, but we have suggested that he attend courses to gain knowledge, and we will be flexible with his work to facilitate his learning.

4. Yes, ma'am, we do feel that. That's exactly what we have been doing for the past three months.

Job Requirements and Proactivity

5. He did match our job requirements, which is what he was interested in. I'm not saying he lacks in all aspects. He has the knowledge but doesn't always know where and when to apply it until instructed to do so. He is being mechanical, and we want him to be proactive. If not for major decisions, at least for those he can handle, we need him to make such decisions independently.

Programs for Improvement

To add on, I have conducted programs to enhance his decision-making ability and encourage thinking outside the box. Other programs to improve his communication and skills are also in progress. My intention is never to reduce his salary because I understand how difficult it can be from an employee's perspective. The Managing Director sits with him for every task, guiding him on how to proceed. By now, we expected him to have a better grasp of it, but progress is slow. If we didn't aim to push him towards improvement and provide good career exposure, we could have been harsh, but that wouldn't be ethical.

Most of the programs within our limits have been implemented, and we continue to push him. Every week, we counsel him and address his obstacles. He claims he is doing fine, but he needs more time to complete tasks. While that's acceptable, his work does not reflect being "absolutely fine." The issue is that we cannot sit with him for every task as we have our own responsibilities to fulfill.

This is why I am seeking alternative suggestions to avoid taking such actions.

Dear Aishwary,

Is there any clause in the letter of appointment that speaks of decreasing one's salary? Does your letter of appointment mention the level of performance expected? Have you counseled the employee regarding the performance you are looking for? Have you warned him about this? Does your standing order allow for a decrease in an employee's salary?

If the answer is No, then you cannot decrease it.

Dear Prabhat sir,

No, sir, it's not been mentioned in the offer letter; that's exactly what I'm afraid of. It's unethical to do so when it's not mentioned in the offer letter. Apart from that, counseling and warnings have been given to the employee.