Post-Lockdown Dilemma: Can Companies Cut Salaries Instead of Letting Employees Go?

Dear experts,

Instead of termination after the lockdown period, can companies reduce the current pay scale of employees?

Kindest regards

Pay scale factors

Pay scale is structured proportionate to a few of the following factors:

1. Character, scope, and volume of the job in hand to be performed strictly as per needed quality, quantity, and time allotted.
2. Availability of competent and skillful doers in a given location - characteristics.
3. Toughness of workplace conditions and/or conducive factors, etc.

An attempt to reduce the current existing package will cause discomfort and disappointment, resulting in losses in many ways. The present lockdown is imposed for a brief temporary period to contain the Covid-19 contagion and will be relaxed suitably. Desist from demotivating workers (all cadres) as the pressures too shall pass soon. Knee-jerk measures are unhelpful in the long run.

Kritarth Consulting Pvt Ltd.
Management Care-Takers
21st April 2020
Bengaluru Service Centre

Try to talk to the employees personally and put forward the issues to see if there is a general agreement towards taking the pay cut and going for a revised salary structure. Make sure there are no disagreements, as one issue might lead to others, and legal consequences may also follow. It all depends on the size of the company, the employees' loyalty, and the employer's financial capability to overcome the crisis in the quickest possible time. Legally, it may not be advisable, but it is better than retrenchment at any time. First, talk to them over the phone/Skype, etc., before putting anything on paper.

Good luck.

Thanks and Regards

You can consider disbursing wages to your workforce, including temporary or migrant workers, while deferring the salaries of your supervisors and above for some time (say up to May 15-20). This should be done after having a dialogue with your staff members, and if possible, send individual communication.

Reducing the Current Pay Scale

Reducing the current pay scale is not recommended and is not a legally viable proposition, as the pay scale might have already been communicated to the employee through valid appointment letters or contracts of employment. Moreover, once a company has provided a certain amount as pay, it cannot reduce the pay packet under normal circumstances but can increase it.

Thanks.

Since our employees are to receive 50% of their salary until the company is able to regain good cash flow, please provide an agreement format to formalize this arrangement with them.

Please note that the company is not deducting the salary; rather, we are retaining a portion of it to support our day-to-day operations seamlessly.