EmployeesPayrollEmployee Pay Adjustment

There will always come a time when you need to change the pay of an employee, which can be either for good, or at times, for bad. You need some things to make sure that there will be smooth adjustments of the wages of your employees. However, before you make any employee pay adjustments, you should first know how and why you should make one in the first place.

Pay Adjustment: A Short Definition

Pay adjustment refers to the change in the pay rate of an employee. You can alter the salary or hourly wage of an employee. Normally, compensation adjustment is a pay rate increase, like when a worker earns a raise. On the other hand, wage adjustment could be a pay decrease, too. This could happen when an employee is demoted or there are changes in his or her duties.

Why Make an Employee Pay Adjustment?

Prior to making any changes in your employee’s pay, you have to make a justification for that salary adjustment. Below are some of the common reasons for making an employee pay adjustment.

  • An employee gets promoted
  • The employee is given a rate for experience or merit
  • An employee is given an increase in cost of living
  • You want to make the wages fair and square among employees
  • The increase is a way of keeping up with competitors or as a market adjustment
  • There are changes in the worker’s shift, which results to addition or loss of premium wages
  • The employee works fewer or more hours
  • The employee gets transferred to another location
  • The employee gets demoted
  • You reduce or increase the responsibilities of an employee
  • You have to reduce wages to prevent any layoff

How to Make Employee Pay Adjustment

When making an employee pay adjustment, you need to adhere to FLSA. Wages of employees must not be below minimum wage. The wages of the employee must be at least the biggest of the local, state, or federal minimum wage.

Also, you have to follow the rules to determine between nonexempt and exempt employees. You should pay overtime wages to the nonexempt employees although you don’t have to give overtime wages to the exempt workers. When adjusting the wages of an employee, the employee could go from nonexempt to exempt, or the other way around.

Before implementing the employee payroll adjustment, you must discuss it with the employee that will be affected. You can have a private conversation wherein you can explain about the adjustment.

Let the employee know the reason behind the change and how small or big this change will be. Explain some other changes which can take place as a result of this adjustment, like the fact that the employee could become exempt from the overtime wages. Make sure you employee knows when this change will take effect.

Update the wages of the employee in the payroll. See to it that the employee pay adjustment starts on the right pay period.