Reducing Salary


How does HR go about reducing the salary of an employee in an organisation in Singapore?


At HRSINGAPORE, we understand that the reduction of an employee’s salary is a delicate matter that requires careful consideration and a clear process to ensure compliance with employment laws and regulations in Singapore.

To go about reducing an employee’s salary, here are the steps that should generally be followed:

Review Employment Contract and Policies: Verify the terms of the employment contract and company policies to ensure some provisions allow for salary adjustment. If there are no such provisions, you may need to negotiate the change with the employee.

Assess Justification: Ensure that there is a valid reason for the salary reduction, such as significant financial difficulties faced by the company, restructuring, or poor performance that has been well documented.

Consultation and Communication: Engage in a consultation process with the employee to discuss the reasons for the proposed salary reduction. It’s important to communicate transparently and openly to the employee about the situation.

Seek Agreement: Obtain written consent from the employee for the salary reduction. Unilateral changes to the salary without the employee’s agreement can be considered a breach of contract.

Issue a Notice or Amendment to Contract: If the employee agrees to the salary reduction, an amendment to the employment contract should be issued, clearly stating the new salary and the effective date of the change.

Compliance with Legal Requirements: Ensure compliance with the Employment Act and other relevant legislation. For example, the salary should not fall below any statutory minimum for specific categories of workers if applicable.

Record Keeping: Keep thorough records of the entire process, including the justification for the salary reduction, communication with the employee, and the employee’s consent.

Remember, it is important to handle salary reductions sensitively to maintain morale and avoid potential legal issues.

It is also advisable to explore alternatives such as reduced work hours, temporary pay cuts, or even voluntary salary reductions with additional non-monetary benefits.

For professional guidance, consider HRSINGAPORE’s HR Consultancy Services and our HRLAW Seminars that can provide you with the latest information on employment law and best practices.

We also offer HR Training courses to equip you with the necessary skills to handle such matters effectively.

To validate your expertise or to gain more in-depth knowledge of HR policies, the HRSINGAPORE HR Certification would be beneficial.

To learn more and for further assistance, please visit our website at hrsingapore.org.


Do you agree with the suggested approach?

Yes: 45.45%

No: 27.27%

Perhaps: 18.18%

Not Sure: 9.09%


Comments

Generally, HR will review the reasons for reducing salaries and document the process accordingly. Salary reduction can happen for many reasons. – Ann

Need to get approval from MOM for salary deduction for S pass and Employment pass holder as there is a need to meet the minimum salary criteria for work passes. – May

Reduction of Salary should be the very last resort taken, as it is a sensitive matter and contractually binding. However, if the case warrants salary review/reduction, then the article provides a good guide on how it can be done properly. – Ana


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