Rescinding Salary Increases

franfields

As a cost cutting measure, our CFO is suggesting rescinding pay increases that have been given this fiscal year, those given since October 1? Any legal ramifications? We are in Arkansas.

Rockie

I don't know of any legal repercussions as employers can always mandate a pay cut, but the morale could be greatly affected. We recently decided to cut our merit pay increases for the year 2002. We had already given the old rate from January 1 to April 30. We just allowed those employees to keep their increases and made the new rates effective May 1. The ones that had gotten the higher rate increase will have to wait a year from May 1 to get additional increases.

Hope this helps.

Carol CA

I would agree with Rockie. I believe legally you could implement the pay cut as long as you did it consistently. If at all possible, however, you might want to consider a freeze or delay of any further increases. Morale will be hit hard no matter what you do, so be sure to COMMUNICATE frequently with your employees as to why these cuts are necessary and discuss what other measures you have taken to try to cut costs. If employees understand the reasons behind the cuts, they may not like it, but at least they understand why.