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3 common types of pay cuts

On Behalf of | Jun 20, 2024 | Wage & Hour Law

As an employee, the last thing you may be expecting is a pay cut. Nonetheless, wages can be reduced. Typically, wage reductions happen when a company is struggling financially or an employee has agreed to take on a new position that involves fewer responsibilities. 

What are some of the more common forms of pay cuts

Reduced salary or hourly rate

Most workers are paid either by salary or an hourly rate. In general, it is legal for employers to cut either of these, but some rules must be followed. Firstly, an employee’s hourly rate cannot be reduced to below the minimum wage in California. Furthermore, wage cuts cannot be imposed retroactively. Your wages cannot be cut for hours that you have already worked or agreed to work. A wage cut must be implemented moving forward. 

Slashed bonuses

Many employees are awarded a bonus every year. However, bonuses are just that- a bonus. They are often not guaranteed and they may depend on yearly job performance reviews. Again, an employer can typically remove these bonuses legally, but this will depend on the type of contract that has been signed and whether or not the obligations of the contract have been met. 

Reduced hours 

In some cases, hourly wages may not be cut, but hours will be reduced. Reduced hours result in a real-time pay cut for hourly workers, because the fewer hours they work, the less money they earn. Again, this is usually lawful unless the employee has signed a contract that guarantees a set amount of hours for a specified period.  

Having your wages cut can be concerning. Seeking legal guidance will help you assess whether or not the reduction in wages or hours was lawful.