Can i reduce salaries

Companies are not exempted from restrictive measures. In fact, in some countries, companies that do not carry out essential activities i. Consequently, employers have had to act in order to limit the negative impact of this situation, implementing measures in order to reduce among other things employment costs, such having recourse to 'social shock absorbers', or requiring employees take holiday or leave.

Another measure taken into consideration by companies to deal with this crisis is the reduction of employees' salaries. Under Italian Law, no specific legal provision exists regarding the reduction of employees' salaries.

However, Article of the Italian Civil Code, which governs the so-called ius variandi , that is, an employer's power to change an employee's duties, should be considered. Under this article, employers cannot unilaterally demote employees and reduce their salary.

Even if an employer assigns an employee to reduced or lower status duties, which is allowed for changes to the organisational structure, the employee is entitled to maintain his or her job level classification and remuneration, except for those elements of the salary connected to specific ways of carrying out the previous duties. Nonetheless, an employee's salary can be reduced by an agreement between the employer and employee providing for the employee's assignment to lesser duties and a lower job category.

These agreements need to be signed before a Conciliation Committee and are valid only if they are designed to further the employee's interests, such as avoiding dismissal, letting the employee acquire a different skill set or improving their life conditions. As a consequence, only the agreements signed on the terms and conditions described above signing before a Conciliation Committee and for specific purposes would be considered valid.

Italian courts have explained their interpretation by highlighting the need to protect employees' reasonable expectation of getting paid a determined amount in compensation for the duties they commit to carrying out when they sign an employment contract; furthermore, it guarantees the employee income stability. On the other hand, Article of the Italian Civil Code limits an employer's ability to reduce an employee's salary only within the exercise of their ius variandi power. It does not explicitly prohibit the parties employer and employee from autonomously agreeing a different remuneration package, as long as it respects the limits provided for by the law and the minimum wage provided for by any collective bargaining agreement that applies to the employment contract.

Considering the above and despite the case law discussed, within the context of the current coronavirus emergency, an agreement between an employer and its employees, which provides for a temporary salary reduction not linked to a change in the employees' duties should be considered possible and lawful, even if it does not fulfill the conditions in Article of the Civil Code.

In any case, some precautions are necessary in order not to jeopardise the legitimacy of the agreement. In particular, employers should take the principle of adequate remuneration into account: the reduced salary must be compliant with the minimum wages provided for by the applicable NCBA, which must be respected absolutely.

Finally, in order to reduce the risk of challenges and litigation, the employee should confirm ex post that the salary he or she received during the period of reduction was correct and waive his or her right to any claim in respect of it. In a nutshell, with adequate preparation, it is possible to reduce the overall cost of labour in this way, which can help employers to avoid employing alternative and more drastic measures.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. WorldatWork asked organizations if they were moving forward with bonuses based on performance:. Despite a substantial revenue loss for many businesses, "the majority of organizations have already moved forward with or are planning to move forward with salary increases and bonus payouts for , and only a handful of organizations have decided to cancel salary increases or bonus payouts," said Chris Moodhe, head of insights at WorldatWork.

That could change, however, if work stoppages and stay-at-home orders by state governments continue past April. Unless employees are protected by an employment contract or collective bargaining agreement, an employer can reduce salaries and work schedules, subject to certain limits.

Employers cannot reduce wages lower than the minimum wage in their state, and pay cuts must not discriminate against legally protected categories i. For hourly employees, employers may have to comply with local predictive-scheduling laws , which require employees to receive advance notice of work schedules and shift changes. However, there are typically exceptions to these statutes in cases of natural disasters and other crises.

A March 24 WorldatWork poll asked about hazard pay incentives, such as spot bonuses, for employees who are required to work onsite during the pandemic. The findings, drawn from responses from organizations, revealed that 26 percent plan to provide hazard pay, either as a flat-dollar cash incentive; a cash incentive tied to hours and shifts worked; or bonuses based on a different formula, such as a percentage of salary.

Meanwhile, 65 percent of respondents with workers onsite said they were not planning on offering extra hazard pay but instead would provide perks such as free meals. Similarly, the Willis Towers Watson survey of large U. Pertinent Perks. While pay is under pressure, employee perks are getting a fresh look. Law firm Seyfarth received more than responses to a recent poll on the topic, mostly from large companies with or more employees.

About 14 percent of respondents were providing additional benefits, which included creative options such as leave donation , tolerance of negative paid-time-off balances, and commuter or parking benefits to keep employees off public transportation. On March 27, WorldatWork asked total rewards professionals if they were adjusting performance metrics in their annual incentive compensation plans in response to the pandemic and economic uncertainty. The results, based on 90 responses, showed that:.

HR consultancy Mercer is advising employers to consider the following actions for long-term incentive plans :. Also, consider how to communicate changes to incentive programs, and be prepared to answer questions from incentive plan participants. Compensation attorneys at Troutman Sanders noted, "Well-drafted incentive plans contemplate potential adjustments to the measurement of performance goals for unusual or unforeseen events.

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Compensation Pandemic Forces Employers to Cut Pay Companies are trimming salaries and wages, revisiting incentive plans. Reuse Permissions. Actively scan device characteristics for identification.

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Develop and improve products. List of Partners vendors. Human Resources Compensation. Table of Contents Expand. Table of Contents. Pay Going Forward, Not Backward. Pay Reduction Notification. When a Boss Can Lower Pay. What About Job Changes? By Suzanne Lucas. Updated on March 01, Article Sources.