Question

Hi HR Practitioners,

I would like to know if it is against the regulation to cut pay due to poor performance.

Every year end, we perform appraisal evaluation for employees, employees with appraisal scored above average setting will have pay raise. On the other hand, if performance below average, they will have their salary cut.

Please advise.

Replies

1.  Not according a pay increase is the usual practice for addressing a performance issue. A pay reduction will go against what is in the service contract n should be carried out only if the employee is relegated to a lesser role.

2.  What’s the purpose of a pay-cut for under performance staff? Has the issue of “poor/unsatisfactorily” performance been addressed by HOD way ahead of appraisal time? 

Since discrimination can occur in many areas of the appraisal process, it is imperative that HR practitioners ensure the appraisal is based on staff set Key Performance Indicators [KPI], staff attendance measured against MC taken, punctuality reporting to work, ability to work as a team, etc. 

Possible discriminatory tendencies like biases or prejudicial practices to “downgrade” a staff should be avoided.  Especially for matured staff above 50 years old.  A poor performance staff only reflects a HOD inability to coach.

3.  If employers are allowed to cut pay due to poor performance, the HR practice would be regressive (going back to the master and servant era when employers deduct for every mistake made by their “slaves”) and the performance appraisal system would be doomed as the workers’ fate is at the mercy of their superiors. Thus, today’s employment law does not allow an employer to deduct or reduce salary based on highly subjective performance appraisal. Poor performance is both a training and disciplinary issue. If an employee’s performance is consistently below expectation, this should be documented for further disciplinary action, ranging from withholding of further salary increment to termination.

4.  No cutting pay from poor performance. But work on lower bonus or no bonus please and also lower increment or no increment. Unless the person's role is changed to a lower level with reduced responsibility, then have to get both side to resign the contract on the lower pay.

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