Can I Reduce an Employee's Compensation Without an Agreement?

Legal Considerations When Reducing an Employee's Pay

Reducing an employee's agreed-upon pay is not something most people do lightly, but sometimes it is necessary. Either there is a performance issue that requires it, or financial constraints for the business.

Assuming you do not have a written contract with an employee that guarantees a specific term of employment, you have the legal right to modify, and even to reduce, compensation on a going forward basis. This is because where employment is "at will," you have no obligation to continue employing them, so you can present essentially a new employment package at the new rate, which they can accept by continuing to work or reject by resigning.

What you need to be careful about is that the change does not affect anything earned before you announce the change, whether that be wages or commissions. Retroactive impact could put you in violation of the Wage Act, and put you at risk of a lawsuit.

Learn more here about the Massachusetts Wage Act.