How to reduce an employee's wages without breaking the law

The Labor Code allows you to legally reduce wages with the consent of the employee himself, under Article 72 of the Labor Code of the Russian Federation, or at the initiative of the employer as a result of the introduction of technological or organizational changes in working conditions, under Article 74 of the Labor Code of the Russian Federation. The introduction of part-time work in companies under Article 93 of the Labor Code of the Russian Federation will also lead to a reduction in payroll.

In addition, there are several other informal ways to reduce wages, for example, sending employees on vacation at their own expense.

The salary amount is specified in the employment contract. Therefore, its change is always a change in the essential terms of the contract, which is documented in writing.

Companies that have established a salary and a bonus, and if the bonus is drawn up correctly and is not a mandatory part of the salary, can reduce the employee’s payments at the expense of the bonus. This is the easiest and most convenient way.

About the awards:

When you can deprive an employee of a bonus: do it correctly

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Ways to reduce employee wages permitted by the Labor Code of the Russian Federation

In the legislation you can find several ways that allow the director to reduce wages. Please note that this has nothing to do with the quality of the employee’s performance of his duties or labor discipline. You can't punish someone with a salary reduction. And the bonus can be deprived only if the documents clearly state for what and upon achievement of what indicators it is paid.

All ways to reduce employee wages

• leave without pay (Article 128 of the Labor Code of the Russian Federation);
• part-time or part-time work week (Article 93 of the Labor Code of the Russian Federation);
• transfer to a position with a lower salary (Article 72.1 of the Labor Code of the Russian Federation);
• reduction of wages as a result of technological or organizational innovations (Article 74 of the Labor Code of the Russian Federation).
• based on the results of certification (Resolution of the Plenum of the Armed Forces of the Russian Federation dated March 17, 2004 No. 2)

Salary information

The Labor Code (Article 57) obliges the employer, when hiring a person, to indicate salary information in the employment agreement. It contains data on salary, possible additional payments, incentives and allowances.

Also see “Standard employment contract: who, why and when can conclude it.”

Information on the procedure for certain payments at the organization level can also be secured through special internal documents. They may have a provision on bonuses.

It depends on what rules are enshrined in these two documents whether the employer has the right to reduce the employee’s salary .

Also see “Local regulations from 2021: changes to the Labor Code of the Russian Federation”.

Reduction of wages by agreement with the employee

If the employee is not against a reduction in wages with a simultaneous reduction in the volume of his work or the number of responsibilities, this can be formalized:

• transfer of an employee to a position with a lower salary (Article 72.1 of the Labor Code of the Russian Federation).
• transfer of an employee to a part-time work week or part-time work (Article 93 of the Labor Code of the Russian Federation).

In both cases, the employee must sign:

• additional agreement to the employment contract, which indicates the new reduced salary;
• order issued by the manager.

By agreement of the parties, part-time or part-time work may be established, including with the division of the working day into parts. Part-time work may be without a time limit and for any period, as agreed between the employee and the employer.

More on the topic:

How can you reduce employee salaries?

How to cut employee salaries

A salary reduction is one of the essential terms of the contract; this must be recorded in writing in an additional agreement, which becomes an integral part of the contract.

Salary reduction at the initiative of the employer

In a difficult economic situation, when organizations have to take measures to increase operational efficiency, including those related to reducing costs (including costs for employees), the question of how to legally reduce an employee’s salary becomes particularly relevant. Current labor legislation primarily protects the interests of employees, who rarely agree to a salary reduction.

However, even in difficult situations, the employer has the opportunity to reduce wage costs and reduce the employee’s salary. There are few options, each of them represents a special process that should be properly documented.

Organizational changes in the company are a reason to reduce salaries

In the Labor Code, Article 74 allows for the reduction of wages to employees as a result of organizational and technological changes in the company.

There is no specific list of organizational or technological changes in working conditions in the legislation.

According to Part 2 of Article 74 of the Labor Code of the Russian Federation, the employer is obliged to warn the employee about changes and their reasons no later than two months in advance.

The notification must be in writing, in any form. All employees must be familiarized with the notice against signature. This is done by issuing one copy of the notice to each employee, and the second copy, signed by the employee, remains with the employer. You can prepare a separate log of acquaintance with notifications.

If the employee refuses to sign the Notification, a report is drawn up.

The notification must indicate:

• reasons for which wages will be reduced;
• terms of the employment contract that will be changed;
• the date from which the change comes into force.

If an employee does not agree to stay and work in the company, the manager is obliged to offer him:

• a vacancy that matches the employee’s qualifications;
• lower position, if any.

Reducing wages by introducing part-time work

The director of the company can, on his own initiative, introduce part-time work for up to six months. But this is provided that the technological and organizational changes taking place in the company threaten mass layoffs of workers. This is the requirement of Article 74 of the Labor Code of the Russian Federation.

Part-time employees are paid in proportion to the amount of work completed (time worked).

Previously on the topic:

Shortened working hours for the summer of 2021: by agreement, on the initiative of the director

You offer an employee another job

According to Part 3 of Art. 74 of the Labor Code of the Russian Federation, if an employee does not agree to work under new conditions, he must be offered another job that he can perform taking into account his health condition. It could be:

• a vacant position or work corresponding to the employee’s qualifications;
• a vacant lower-level position or even a lower-paid job.

Please note that the law does not oblige you to offer an employee vacant higher positions.

The job offer must be in writing. Moreover, all vacancies available in the area that meet the specified requirements will have to be offered. In other localities, work is offered only if it is provided for by a collective agreement, agreements, or employment contract.

What does it say in a new job offer notice?

First of all, the reason why the vacancies are offered is stated. Example wording: “In connection with your refusal to continue working under new conditions, on the basis of Part 3 of Art. 74 of the Labor Code of the Russian Federation, we offer you a transfer to another job. Vacant positions as of <date indicated> ...".

Next, indicate the name of the position and the salary. Some experts advise attaching job descriptions to the notice so that the employee does not have questions about duties and job functions.

The notice should also indicate the deadline within which the employee must be informed of his decision. Although if he agreed to respond to the offer later than the specified period and the vacancy is still open by this time, then the employer will have to provide it.

What to do if there are no vacancies

If there are no vacancies, then the employee must also be notified about this. But in this case he will be dismissed under clause 7 of Art. 77 of the Labor Code of the Russian Federation, and this will need to be recorded as a basis in the order, in the personal card and in the work book.

On the day of dismissal, a calculation is made: the current salary is paid, compensation for unused vacation, as well as severance pay in the amount of two weeks of average earnings.

In a situation where an employee himself refuses a vacancy, there are no protected categories. Therefore, an employer can fire an employee who is on sick leave, a woman on maternity leave, or a pregnant woman.

Ways to illegally reduce wages

Among the most common ways to reduce wages illegally, employers most often use:

• Presenting the employee with a fait accompli: either agree to the conditions set, or “voluntary” dismissal;
• If an organization finds itself in a difficult financial situation, employers use wording such as “reduction of wages due to a crisis situation,” etc. Such an explanation is not provided for by law;
• Reduction of bonuses without the presence of circumstances provided for in Art. 74 of the Labor Code of the Russian Federation, explaining that the bonus part is being reduced, but the salary remains unchanged. Sometimes this situation is caused by a misinterpretation of the law;
• Reduction of salary, but increase in bonuses in order to motivate work and improve productivity;
• Reduction of salary without explanation, notification of the employee, signing of the relevant papers.

Thus, there can be many options for unlawful reduction of wages. They are the result of deliberate actions or ignorance (misunderstanding) of the law.

One way or another, if wages are reduced not in accordance with the Labor Code of the Russian Federation, the employee can challenge this fact in court.

Do I need to register if my salary changes downwards?

The current legislation of the Russian Federation determines that the employer does not have the right to reduce the salary of employees without their consent.

The conclusion follows from this - issuing a notice of a reduction in wages is an integral part of this action.

The initiative in this case always comes from the management of the enterprise.

It is important to take into account that the employee has every right to disagree with the information specified in the notice.

To investigate the situation, he can file a complaint with higher authorities, for example, the court.

The need to reduce wages in most cases arises for the following reasons:

• decrease in the company's profitability. If such a circumstance arises, the employer can take advantage of several options for the development of events. The first involves a reduction in staff, the second - a decrease in their income;
• transfer of an employee to a lower position;
• reorganization of the enterprise. During this event, changes are made to the technical and organizational conditions for the work.

Important - the employer has the right to try to change the salary of employees downwards only if circumstances from the list presented above occur.
Reducing your salary at your own request is a violation of the norms of the Labor Code of the Russian Federation.

Before sending a notice to employees, the manager must inform them of the reason why he is taking this action.

This must be done at a general meeting or in any other way.

Normative base

To answer the question whether the employer can reduce the salary, one must keep in mind that the amount of the salary is necessarily fixed in the employment contract. Labor Code of the Russian Federation in Art. 57 directly provides for the mandatory indication of the conditions for remuneration of the employee in this document. And here is Art. 135 of the Labor Code of the Russian Federation specifies that the salary is set by the employer in accordance with its current remuneration system. In this case, the fixed component (salary, rate) is reflected in the staffing table of the institution. The variable part of income (incentive payments in the form of bonuses, etc.) is regulated by local acts of the employer, that is, the provision on bonuses, for example.

Consequences of illegal salary reduction

An illegal salary reduction is a reduction in an employee’s monthly earnings by amending an employment contract (agreement) in violation of the procedure established in the Labor Code of the Russian Federation, or paying a smaller salary without changing the provisions of the employment contract.

For an illegal salary reduction by prescribing new conditions in an employment contract without the knowledge or consent of the employee, the head of the organization may be held administratively liable under Art. 5.27 Code of Administrative Offenses of the Russian Federation. Then, in accordance with this article and the provisions of Art. 2.4 of the Code of Administrative Offenses of the Russian Federation, the guilty person is subject to the following punishment:

• official - warning or imposition of a fine in the amount of 1,000-5,000 rubles;
• Individual entrepreneur - 1,000-5,000 rubles;
• legal entity - 30,000-50,000 rubles.

For failure to pay wages in full, the employer faces liability under Part 6 of Art. 5.27 Code of Administrative Offenses of the Russian Federation. Responsibility is as follows:

• for officials - a warning or a fine in the amount of 10,000-20,000 rubles;
• Individual entrepreneur - 1,000-5,000 rubles;
• legal entity - 30,000-50,000 rubles.

In ch. 38 of the Labor Code of the Russian Federation regulates the financial liability of the employer and the employee, but it does not establish the financial liability that awaits the employer in the event of an illegal reduction in the employee’s salary. In particular, according to Art. 236 of the Labor Code of the Russian Federation, the head of an organization is found guilty only in case of violation of the terms of payment of wages, and not of its reduction. Criminal and civil liability for illegal salary reductions are also not provided.

Sample notification

When drawing up a document, refer to the sample notice of salary reduction.