Ask the Pro: Can I Demote an Underperforming Employee?

by Mammoth Team on January 6, 2016

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

A: 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 described 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.

That said, the short answer is "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.

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 measure 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, 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.employee-demotion.jpg

Topics: Compliance, Best Practices