Is it legal to demote one of the staff (executive or worker), i.e. reduce his job?

Dear colleagues,

Query on Demotion and Legal Implications

I have one query: Is it legal to demote one of the staff (executive or worker), i.e., reduce their job? The reason could be poor performance or not meeting the desired objectives. Management may not want to terminate the staff but rather keep them in service, place them in a lower position on the career ladder, and reduce their salary. Is it possible to do this without encountering legal issues? Can someone provide guidance in light of the labor laws applicable in this context?

Regards, Tariq Pervaiz Head of HR & GA Division YKK Pakistan

Dear Mr. Tariq, I think that before seeking an answer for your query, it is imperative to understand the effects of promotion or demotion on the contract of employment between the employer and employee.

Understanding Promotion and Demotion in Employment Contracts

Promotion gives an employee the latitude in the advancement of his career in the same organization based on his seniority or merit, or merit-cum-seniority as provided for in the Service Regulations or Service Manual. However, in the realm of employment, the contract of employment normally does not contain any term guaranteeing promotion or elevation of the employee to a post of higher cadre or status from that of his initial appointment in the organization unless it is specifically mentioned. Thus, promotion to a higher post or cadre involves a change of the existing contract of employment. The same applies to demotion. In other words, as the demotion of an employee involves a unilateral modification of the contract of employment by the employer, he can do so without the consent of the employee in case of redundancy or disciplinary action only.

Demotion Due to Performance Issues

In the scenario cited, if I am correct, you want to move the employee from the job for which he was originally appointed to a lower-level job due to performance issues. Certainly, this will require his free consent. Otherwise, you have to terminate his services only after due process of disciplinary action.

Management's Approach to Demotion

Management would not like to fire that staff, and keep him in service, put him in a lower position on the career ladder, and reduce his salary?

This step will be totally demotivating for the employee.

Poor performance of an employee could have been corrected through counseling, putting him on a PIP, etc.

Have you tried all of this and found him not ready to improve or incapable of improvement?

Reducing an employee from, say, Manager to Deputy Manager would require you to have disciplinary proceedings, and the service rules of the company should have such provisions.

Poor Performance or Not Achieving Desired Objectives

Is the poor performance documented - warnings, counseling, etc.?

Are the desired objectives quantified and made known to the employee?

Basically, reducing an employee to a lower designation should be done with free consent, following the due process of the rules of the company, which should be consistent with the law of the country/nation.

So, act with due thought and care and ensure that your paperwork is complete regarding the employee's poor performance and inability to live up to the standard of the present appointment.

My dear colleagues,

Thank you so much for the urgent feedback. After going through the above comments and deep thinking, it seems better to terminate the employee (of course after due course of disciplinary action and as per the service contract) rather than demoting him and still keeping him in service. I believe I have understood the message.

I appreciate the responses. Thanks again.

Best Regards,
Tariq Pervaiz