Under what conditions can employers reduce pay?
Employees often represent the most expensive aspect of companies' operational costs. When sales are booming, employers may have no trouble meeting payroll and, in fact, find they need to bring out additional employees to handle the workload. However, when business peters out and revenue isn't steady, company owners might find it difficult to issue paychecks on time.
At this point, they can consider reducing staff numbers, scheduling employees for fewer hours or reducing employees' pay. The Department of Labor's Fair Labor Standards Act (FLSA) guarantees workers rights to certain employee benefits, such as minimum wage and overtime pay as long as they don't meet the criteria for an exemption.
Before employers cut back workers' wages, they should make sure they are not violating the FLSA, since missteps can lead to investigations and further penalties.
- If employers decide to reduce employees' hourly wages, they must guarantee those earnings don't drop below federal or state minimums. However, the FLSA does not prevent businesses from making adjustments to hourly rates otherwise.
- If companies force salaried employees to take a pay cut, they must make sure decreased wages decreased don't change the workers' classification. A reduction in wages may cause the employees' earnings to fall below the $455 per week minimum required for an exemption status.
At this point, they can consider reducing staff numbers, scheduling employees for fewer hours or reducing employees' pay. The Department of Labor's Fair Labor Standards Act (FLSA) guarantees workers rights to certain employee benefits, such as minimum wage and overtime pay as long as they don't meet the criteria for an exemption.
Before employers cut back workers' wages, they should make sure they are not violating the FLSA, since missteps can lead to investigations and further penalties.
- If employers decide to reduce employees' hourly wages, they must guarantee those earnings don't drop below federal or state minimums. However, the FLSA does not prevent businesses from making adjustments to hourly rates otherwise.
- If companies force salaried employees to take a pay cut, they must make sure decreased wages decreased don't change the workers' classification. A reduction in wages may cause the employees' earnings to fall below the $455 per week minimum required for an exemption status.
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