Posted on July 19, 2015

Ask HR: Is This Demotion Allowed?

Just when you think you’ve heard it all, one of your employees stumps you with a question you haven’t heard before. The pros at the HR Support Center really have heard it all—at least, until tomorrow.

Here is a recent question from a real HR professional, and the expert advice given by HR On-Demand, one of the features available to HR Support Center subscribers.

Question: A recently hired employee has the skill set to perform most but not all of the duties he was hired to do. Can we demote him to a different position and reduce his compensation?

Answer: Yes. As long as the employee does not have a written employment contract guaranteeing him a certain position or rate of pay, you may reduce his pay and transfer him to a position for which you feel he is better qualified.

Before taking this step, you should consider the pros and cons of changing his role. It is common for an employee to not entirely meet the ideal outlined in the job description. Remember that you put time and money into hiring him for that position and he accepted your offer for this particular title and rate of pay. With that in mind, are the skills he’s missing something he can learn through training? Is a new hire likely to have all the skills you’re looking for? Would the demotion hurt overall employee morale? If his role is changed, would he likely leave the company, and, if so, would the company suffer an appreciable loss?

However you answer these questions, we recommend that you document the employee’s substandard performance, skill gaps, knowledge deficits and any measures you took to address these matters. If you do decide to transfer him, this documentation may prove helpful if you are ever challenged on the decision.

Should you choose to change his role, you should meet with the employee, along with a third-party witness, to explain the changes and provide him with a new offer letter delineating the new terms of employment. Be sure to mention any previous coaching and any warnings the employee received. While not required, advance notice of a decrease in pay would help you to maintain a good rapport with the employee. Calling the move a “transfer” instead of a “demotion” might help as well.

As with any employment matter, you should apply your policies consistently. If you have any other under-performing employees in similar positions, you should take the same course with them. Not doing so could open you up to charges of discrimination or retaliation.

Answered by HR Pro Sarah, who has extensive HR experience in the legal, software, security and property preservation industries. Sarah has a Business Communications degree from Villa Julie College (now Stevenson University) and a master’s certificate in Human Resources Management and a Strategic Organizational Leadership certification from Villa Nova University. Sarah is also a member of the National Society of Human Resources Management and has managed the HR function for small startup companies to mid-sized/large organizations.

_This Q&A content is taken straight from the experts at HR Support Center. Click here to learn more about HR Support Center and HR On-Demand; we’d also love the chance to explain in person