Salary Reduction Letter

The reduction of salary should always be authorised in writing by the employee and is principally for the employee’s benefit. A written record can help protect your business if any questions or legal issues arise regarding the pay reduction. 

You can face up to $12,000 in fines if you do not have ethical reasons to do so. Therefore, it is recommended that you communicate with your employees before reducing their salaries in order to obtain their understanding and reach a mutual agreement.

Use this Notice of Reduction of Salary if:

• You would like to reduce an employee’s pay due to reasons other than their performance.
• You would like to concisely explain to the employee why the pay cut is necessary.
• You want to follow all the proper processes in reducing the employee’s pay
• You would like to have a record of the reduction of salary.

What does the Notice of Reduction of Salary cover?

• Explains the reasons why the pay cut is necessary.
• Informs the recipient when the pay cut will be implemented
• Sets out the new pay rate and the effective date

Other names for Notice of Reduction of Salary include:

• Notice of Pay Reduction
• Salary Reduction Letter
• Notice to Reduce Payment
• Notification of Pay Deduction

Further information:

• Reducing an Employee’s Pay: What You Need to Know (2019 Update)
• Avoiding the Pitfalls of Redundancy: Lessons for Employers