Skip to Main Content
by Vault Careers | March 31, 2009


HR Guy,

I know with the economic slowdown many companies have done restructuring in order to gain revenue. Can a company just drop your salary substantially (20+%) and raise your commission? Do you have to sign a letter agreeing to the new compensation terms?

If you do not agree with the terms and you don't sign a letter agreeing to a large pay cut of your base salary and higher commission are they allowed to withhold your pay? What are the repercussions? PLEASE HELP???

Recruiting Specialist

Dear Recruiting Specialist:

The first question you need to ask yourself is, do I want to continue working at a place like this? If your employers have not discussed the new compensation situation with you, red flags should be going up. This is not a good place to work. The right thing for a company to do would be to sit you down and explain the difficult outlook for the company. The company should try to work out an arrangement that is not too painful for both parties. On the other hand, a cut in salary is never anything but painful, and you have to decide whether working at this company is worth it.

This decision is particularly important because there really is not a lot you can do to stop the pay cut unless you are under contract. If your employment is based on a signed legal contract between you and the employer that clearly states terms of compensation, and it also states that the employer is not allowed to alter the terms without your consent, you would have very solid legal ground to stand on in refusing to agree to the cut. However, most employees work under an "at will" situation, which means that both company and worker can terminate employment at any time.

Depending on where you live, in the case of "at will" employment, the company can lower a worker's pay at any time without having to obtain written consent. All the company needs to do is reissue an offer letter with the revised compensation terms and present it to the employee. If the worker refuses the new offer, employment is essentially terminated.

In this particular case, you have to wonder if your employer has made this pay cut in order to get you to quit. Unfortunately, there is not a lot you can do. You might be able to file a complaint with the labor relations board, but your chances are iffy. Sometimes, it's best to move on to better things.

Good luck!

HR Guy

Do you have a question for the HR Guy? Write him at Inc. ("Vault") makes available the information and materials on this site (the "Materials") for informational purposes only. While we hope and believe the Materials will be helpful as a background matter, we cannot warrant that the Materials are accurate or complete. Moreover, the Materials are general in nature, and may not apply to particular factual or legal circumstances. In any event, the Materials do not constitute legal advice and should not be relied on as such. Therefore, if you want legal advice, please consult a lawyer. VAULT DISCLAIMS ANY IMPLIED WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.


Filed Under: Workplace Issues