Demotion Dilemma: Should an Employee's Salary Drop After Poor Performance?

Dear All,

If an employee is demoted due to poor performance and bad behavior towards other employees, what policy should we follow regarding his salary? Should it remain the same or decrease?

Suggestions, please.

Regards,
S.N. Rahaman

Hi,

Demotion is the worst thing; do not demote the employee. If he is not performing well, find out the reason. If it is because of a lack of knowledge, train him to enhance his skills; if it is because of behavior, give him training for the enhancement of interpersonal skills. Demotion would be the worst thing to do, and every company should avoid it as it spoils the reputation of the company as well. A demotion would completely frustrate the employee, his performance would worsen, and he would leave the company. It would make a bad impression in front of other employees as well, and they would feel insecure. Today, such words have no place in the organization - demotion, firing, etc. The organization should have the capability to get quality work from the employee, and if it doesn't happen, it means the organization is not utilizing its resources properly.

Regards

Hi,

I am very impressed by Durga2's comments. Actually, all organizations should adopt these suggestions and embrace the idea of minimizing demotions in our organization. To answer your question, when you demote your employee, basically, you are not allowed to reduce his/her salary; you can only remove other benefits that are not legally binding. I don't know how legal systems in your country operate, but that's the principle in my country.

Regards,

Dear Rehman,

We have to abide by the provisions of the Payment of Wages Act 1936. My general knowledge says that we cannot reduce Basic + DA of an employee. Other allowances, if any, can be reduced. We are also not permitted to pay below the Minimum Wages.

However, you can seek advice from legal experts.

Thanks,
Dinesh V Divekar

Hi,

I agree with the earlier opinion, but the answer to the question is: once you have raised the basic, it can't be reduced in any case. However, you can withdraw the facilities, reimbursement, and other benefits. Legally, it would not be problematic if you have written evidence in support of the demotion.

Arun

Hi,

Thanks for your question, in addition to others' comments. The best approach for undisciplined and poor performers is to withhold the increment and promotion after notifying them. Simply reducing the salary will not be effective. Instead, it would be beneficial to identify, train, and motivate the individual in their specific areas of weakness to improve their performance.

Regards, G Govindaraj

Simple question: Can we reduce the salary when we demote a person as a punishment? The law permits demotion, reduction in salary, dismissal, and suspension. The management needs to decide on the punishment. Legally, demotion permits a reduction in salary, including the basic salary.

Siva

Hello,

What is wrong with demotion? Is it not better than dismissal?

In fact, you will come across demotions only in cases where the person's potential is very low. In my 35-year career, I have come across demotions in two instances. It has not created any adverse feelings. In fact, if such a bold decision is taken in the correct case, it will be appreciated for two reasons:

1. We have saved a family by saving the earning member's job.
2. HR and the management are firm in making decisions.

You will not come across many cases, but surely, you will come across one or two cases spread over 20 years.

Siva

Hi Siva,

There are so many things in law that sound illogical. Taking pills for pain without considering their side effects may cure your pain but could lead to many other health issues. The same is the case with demotion. Demoting an employee may be better than dismissal, but it could force the employee to submit his resignation, which is not a good idea.

I do not understand why we Indians stick to the laws. I accept that we should not break the laws, but can't we think beyond and make decisions that bring improvement overall?

THINK BIG and THINK BEYOND THE LIMITATIONS.

Regards

Dear Durga,

I do think beyond limitations. That is why I am giving this and talking about this. I am not legalistic as you presume, nor are you forward-looking as it looks. Let us look at situations and handle.

You are talking about a highly qualified or a qualified person. I am talking about a situation where an average person with little qualification was elevated. This elevation is done considering the conditions that prevail.

After a few years, you continue with him, but he does not perform. You sideline him in the organization. Won't he resign? He won't because he does not have the requisite qualification to get a job.

Many organizations make a mistake of promoting a wrong person, sidelining him, and pressurizing him to resign. This is very old thinking.

Look at it differently. You assign him work which you think will suit him. You will definitely retain a good worker. He will get used to this and he will also understand. This is a better approach and it works.

You will show a humane approach here. Please forget law for the time being. I don't believe in the legal framework, to be honest with you.

Siva

Dear Durga,

One more point here: The question posed was whether we can reduce salary when there is a demotion. I replied, "legally we can reduce." The question was not about whether the punishment or demotion is a desirable practice. I presume for such specific queries, we need to answer to the point. The organization has taken a decision to demote and they are not consulting us about the punishment; the consultation is about how do you go about?

Best wishes, Siva

Hi Siva,

Mr. Rahman asked, "What policy should we follow?" I just gave my advice, which I found most suitable to be followed to keep the organizational environment healthy.

Regards,
Durga

Dear Durga,

This was the posting by Mr. Rahman:

"If an employee got demotion because of his poor performance, bad behavior against employees, what policy should we follow in case of his salary - whether to keep it as it is or decrease it? Suggestions, please.

Regards,
S.N. Rahman"

Just for your reference, there are two issues:

1. Are we replying to the base query?
2. If we are not, then we can have a different posting for debate. Views will differ.

For his base query, I do not think there can be two views. But for your posting, there will be different views.

Siva