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Demoting an Underperforming Employee

employeeA recently-hired employee has the skill set to perform most but not all of the duties they were hired to do. May we demote them to a different position and reduce their compensation?

Yes….if the employee does not have a written employment contract guaranteeing them a certain position or rate of pay, you may reduce their pay rate and transfer them to a position for which the organization feel he/she is better qualified.

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

In whatever way you answer these questions, it is recommended 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 them, having this documentation may prove helpful if you are ever challenged on the decision.

Should you choose to change their role, meet with the employee, along with a third-party witness, to explain the changes and provide them with a new offer letter detailing out the new terms of employment. Be sure to mention any previous coaching and any warnings the employee may have received. While it is not required, an 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” will most likely 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.

Should you have any additional questions regarding this or other employee topics, contact CyQuest today!