Employment Laws: Reduction of Wages and Working Hours

October 25, 2020| Miss Agnes

Employment Laws: Reduction of Wages and Working Hours

Temporary Employees | Praxis Legal SolutionsAssignment

Compose a 10-page critical analysis research paper that addresses a specific topic of interest regarding employment law and the contractual relationships between employee and employers. Within the analysis, be sure to include at least five authors’ positions on the topic from scholarly peer-reviewed journals and be mindful to utilize sources that were published within the last three years. Students are to be sure to include a reflective portion regarding their analysis of the topic rather than just summarizing the journal articles chosen.

You may propose an alternative project of your own design that shows attainment of the corresponding course outcome. The mentor must approve the alternative project.

Sample Answer


This research paper reflects on the contractual relationship and employment laws in line with the reduction of wages and working hours. Often an employer’s decisions to reduce employee pay are influenced by economic performances in the organization. Wages and salaries constitute the most significant cost of operation that determines the profitability of a company. Also, an employer may wish to establish a competitive advantage in the market through selling products at relatively lower prices. To achieve these goals the company often focuses on moderating its costs without compromising its profits. Depending on the nature of the relationship and the State the laws governing the operations may differ slightly. Employee and employer relationships are governed by the employment laws and the terms of the contract. This research paper is a critical analysis of employment laws on a reduction of wages and working hours within the period of the deal. For analysis at the global business level, the discussion is based on the US and China perspectives on the reduction of wages or the working hours. Often the employer is required to notify the employee through a letter of a memo explaining clearly for the reasons for the pay reduction. In the letter, an employer appeals to the employees on the pay restoration when the condition in the organization is restored.

Background Information

In the US pay reduction is governed as well by the minimum wage law. The employer is guided by the terms of the contract incorporated in the employment law. The federal minimum is $7.25 per hour with some states having higher minimums. An employer is obliged therefore to the minimum set through the state statutes. The state minimum is never below the Federal minimum. Also, the standard number of working hours is 40-in a week. Employees in the management may work for more extended hours below the minimum. The wage cut process need also to be fair to the employees without any form of discrimination on age or ethnic origin. According to Chen, and Horton, (2016) employees are keen to evaluate the wage levels on assessment of what is available in the market. In addition to the employment laws, the employer is called upon to the understanding that fairness is more critical in employment contracts than in other contracts (Kochan, & Riordan, 2016). All the proposals for a different wage are considered as a process of renegotiation of the contract. This calls for the employer to have an understanding of whether the employee is a contract partner or otherwise.

In China, pay reduction is based on termination and renegotiation of the terms of contracts which can only be fulfilled under certain circumstances governed by the China Labor contract Law. In Oher words, the employment terms in China are stricter on the formal contract, and all changes are based on the need for reevaluation of the terms of the contract in which pay cut and wage hours are not an exception. The law in China is highly protective to the employees and before the pay cut legalized a lot of legal restraints are encountered. Many labor-related risks exist in the country where HR or the employer fails to comply in this accord. A lot of consultations between the employer and the employee are done and the employer is required to make such changes in formal writing. The employees, on the other hand, assert their signature as evidence of their consent without objection to all the changes made.  According to Cheng, Smyth, & Guo, (2015) the China Labor contract law that requires formal contracts to be mandatory has helped to improve the outcome of the workers significantly. The new terms that were implemented in 2008 are considered as the greatest reform on employment regulations in the country. Also, the law governs that if an employee proves incompetence in administering a given role the employer would have rights to transfer them to different functions under different contract terms.

In this research paper, the consideration is that employment protection legislation (EPL) for a pay cut and wage hour’s reduction is a global concern. In other words, both the US and other countries have clear laws that govern the conditions and the process of a pay cut. The contract terms also govern the decisions an employer would take, considering an employee as a contract partner. A reduction in wages is an indispensable element of the contract that would thus require the informed consent of the employee.  In US consideration are for the employer to notify the employee of such changes in advance appealing to the need for change and future implications. In China, on the other hand, the labor contract law governs for the renegotiation of the terms of the contract requiring the employer to express the changes in written form with the employee signature as a sign that they are not in objection of the new terms. Reduction of wages and working hours has significant legal implications to the employer and the employee since they are governed by the employment laws and the terms of the contract which are the primary aspects of employee protection legislation a critical aspect in the global market.

Employment laws on Wage Reduction in the US

The Fair Labor Standard Act requires the employer to maintain the federal minimum wage for all the covered employees. In other words, the law protects the employee from pay cut below the minimum wage rate. Also, this law requires that the employee is paid overtime for hours worked above 40-hours a week (Kochan, & Riordan, 2016). The employer cannot at any circumstance violate overtime payment as a substitute to a wage cut. FLSA is reinforced by other state and local laws to enhance protection of the employees from the violation. For instance in 28 states in the US the minimum wage is more than the Federal minimum. There is no requirement for the employers to have all the items of a contract documented such as the changes in the wage levels. This law also defines that employee’s compensation needs to be free from any form of discrimination by race, age. The employer needs to appeal to the employees that the pay cut will be made in a given percentage to the wages received by the employees. Both the management and the subordinate employees also need to be treated equally regarding the pay cut. All these requirements are enforced by the Department of Labor and the wage and hour division. The FSLA has no restrictions to the employers on the need to reduce the number of working hours provided all other statutory requirements like the minimum wage and payment of overtime are maintained.

The FSLA has a clear guideline on a reduction of salary for the exempt employees. In other words, the US employment law offers protection and guideline on the conditions that must exist to fulfill a reduction of predetermined salaries either temporary or permanent. One aspect is that a reduction in the salary of exempt employees often leads to the loss of the exemption. The implication is however that the employee will be paid based on minimum wage and overtime as defined by the FSLA for the nonexempt employees. However, there are conditions such as economic downtown that may protect a salaried employee from losing their exempt condition. Most of the exemption exists for employees in the executive or professional capacity. The salary of these employees may not as well be subjected to the reduction process based on a decrease in the quality and the quantity of the work performed. This law extends the provisions to the short-term deduction of the employees’ salaries based on reduced work performed especially when the employee is willing to work.

The US law requires the employer to notify the employee about salary reduction before they can work in the new salary rate. This means that before a new salary or wage term is implemented the employees need to express their consent agreeing to work under those new terms. This gives the employees a chance to negotiate through a collective bargain or legal assessment while an employer reviews their considerations. An employee has the right to decline the new terms which would mean ending the contract with the employees. The employee gives details on when the new terms will be implemented giving them an equal chance to decide on the specific actions.  The employment law is incorporated into the existence of the company in business (Chen, & Horton, 2016). The decision to reduce salaries is controlled by threats of bankruptcy that would see employees lose jobs (Blanchard, Jaumotte, & Loungani, 2014). As a capitalist nation and with efforts to reduce unemployment law employment organizations like the Division safeguard the rights of the employer. An individual employee can also accept lower pay in the event of a job change. This occurs when there is demotion based on incompetence’s outlined for the high rank.

In summary, the US law allows the employer to reduce wages, salaries and working hours provided the four major requirements are not violated. One is to notify the employee of the pay cut to allow them to give informed consent of the new terms. The employees are not expected to object the new terms but to make decisions regarding new terms before they are implemented. The second is the pay cut also need not be nondiscriminatory by race, wage, position, a profession in which the statutes of the local, state and federal governments on discrimination are not violated. The third consideration is if there is a contract that states that the employee salary cannot be reduced on those conditions then the reduction would not be effective. To implement the pay cut on such condition the management needs to negotiate for such change since the employee is a contract partner with equal negotiation rights.  The fourth factor is the reduction is to be guided by the minimum wage rate by state or federal government.

Employment Laws on wage Reduction in China

Pay cut in China is governed by China labor contract law. The law that governs those employments relations be in written contracts guide the framework through which the pay cut can be implemented. A contract has clear terms that govern the relationship between the employee and the employer. The wage rate is clearly defined as an indispensable element of the contract. Neither the employer nor the employees are given the full mandate to make amendments on the conditions outlined by them. The two parties have equal rights to negotiate for salary or wage rate.  The employer needs to make all relevant consultation with the employee who needs to agree to the modification by signing documents for the new terms. The contract is the primary guideline to the relationship. A pay cut is often implicated by the law to be a reevaluation of the terms of contract. According to Cheng et al., (2015) the labor contract law requires that the employer must maintain the maximum working hours for the employees. The employees bargaining power strengthened by other sections gives the employee an upper hand to the negotiation over the employer in business and corporate level.

The China labor contracts law allows the employer to make a pay cut through a change in the employee’s position. In other words, the employer has no right capacity to reduce the wage of employees based on incompetence unless where a contract is signed for a new position. This is clearly defined in article 40.2 that affirms change of a position where the job is incompetent. The HR is mandated with an obligation to change the duties performed by the employee and also decide on the salary thereafter. To fulfill this provision of the labor contracts law the individual employer need to do so by an evaluation based on the internal rules and policies governed by the law. It’s often like the employee needs to understand the internal policies of the individual organization that governs this relationship (Chen, & Horton, 2016). The implication is that if the employer has no such clear guidelines that are understood by the employee then before any action is taken there would be needed for prior agreement with the employee before demoting the employee and making the pay cut decision. In most of the cases, the employer is not quick to demotion and pay cut based on the legal obligations involved.

The employer is empowered to reduce employee salaries based on a violation of the policies. This is governed under the contract law article 39 that defines that if the misconduct by the employee is minimal to warrant for dismissal, an employer can demote the employee and cut pay. The prior condition for this action would be that the employee had been bound to the employer’s rights to enforce penalties through such terms. Also, the employer would need to have such rules and policies that provide for a pay cut and which have been discussed and made known to the employees through a comprehensive set of policies. The law also outlines and governs the ranges within which the pay cut is initiated. The arbitrators and the judges have the mandate to decide what ranges of the pay cut would be initiated. This legal mandate to reduce the employee pay is highly restricted such that the employer often engages legal consultancy before making any major decision. Failure to comply with the limitations of these four conditions would lead to huge penalties. The employer has it in mind that the contract laws are aimed at empowering the employees. The employers need therefore to consult the law practitioners before the decision and not after based on the dangers of the unilateral decision-making process.

This means that unlike in the US the employment laws on the reduction of wages and working hours are more employers centric. The law has been strengthened by the fact that formal written contracts are mandatory in China but not in the US. All the legal process and terms safeguard the right of the employee to work for the agreed salaries. Through a contractual relation, all the terms are clearly defined, and the employee and the employer must abide with them without which legal implications would be inevitable. The contract laws are basically meant for the protection of the employees and not for punishment for any form of misconduct by them. With this consideration, the employer needs to take all the precautionary measures before making any critical decision.

Implications to the Employer

In the global scale, both large scale and small scale employees are affected by the employment laws. The FSLA and CLCL require the employer to uphold all the regulations in regards to their efforts for a pay cut. As the employer reduces the salaries and wages, all the violations to the laws would attract considerable penalties in the federal and state courts. Also, the company would be exposed to public scrutiny on the general relationship between the employer and the employee. While in China the laws are stricter each of the employers has a responsibility to uphold them. Employment protection legislation (EPL) is expensive efforts for the employer operating locally and abroad (Louis, & Urcan, 2017). As employer spend more on penalties and as the power to control such actions like pay cut reduces policy implementation becomes difficult. In the event of heavy cash flow, the company experiences difficulties in restoring its operations. Employers are equally unable to handle the employee misconduct effectively. In the context of the need to reduce the working hours, the cost of production remains high although such efforts when guided by the availability of productive work can lead to increased production. The contractual relationship has the most significant implication to the employer. In the US formalization of some of the contract terms are not mandatory. Having clear contract terms increases employee bargaining power.

Implications to the Employees

Pay cut and reduction of the wage hours often lead to decreased income for the employees. Although in overall the employment protection legislation has positive implications for the employees, some circumstances inflict them to decide between the wages and employment security. There are also ethical implications for the case. Where the law provides pay cut and the wage hours as illegal the employee needs to decide between the company turning bankrupt and losing the competitive salaries (Balz, 2017). The laws also provide for the terms of punishment following all the forms of misconduct. China LCL provides that some certain conditions best interpreted by law the employer can legalize pay cut with minimal negotiation with the employees. This has made the employers victimized that all the consultation and notifications are based on formalizing the process. In the US the implication is that employees can feel they are not protected thus most of the cases are never reported.

On the other hand in China employees may feel superior over the employer. The employee may feel that they are not obligated to general business conduct and the policies as well. When this occurs, there is a general decline in the costs of production. Demotivate the employer on the commitment of the employee as a general responsibility which leads to significant implication.


This research paper identifies that the employees on the global scale are protected from pay cut and reduction of the working hours. The federal government requires that there is a minimum wage rate payable to an employee. The minimum wage rate helps to reduce the extent to which the wages and salaries can be completed. Results from the US employment laws on pay cut have reflected those standards in China.  Unlike in the US, all pay relationships are defined by through the contractual agreements. Employment protection legislation efforts have both positive and negative implications for both the employee and the employer. To the employer, it depends on the country with which the operations are manifested. Employees who are protected by the labor laws from pay cut are likely to maximize efforts to enhance pay cut. One factor to remember is that the EPL laws are meant to protect and safeguard the rights of the employees.


Balz, A. (2017). Cross-national variations in the security gap: Perceived job insecurity among temporary and permanent employees and employment protection legislation. European Sociological Review33(5), 675-692. https://academic.oup.com/esr/article/33/5/675/4102109

Blanchard, O. J., Jaumotte, F., & Loungani, P. (2014). Labor market policies and IMF advice in advanced economies during the Great Recession. IZA Journal of Labor Policy3(1), 2.

Chen, D. L., & Horton, J. J. (2016). Research note—Are online labor markets spot markets for tasks? A field experiment on the behavioral response to wage  cuts. Information Systems Research27(2), 403-423.

Cheng, Z., Smyth, R., & Guo, F. (2015). The impact of China’s new Labour Contract Law on socioeconomic outcomes for migrant and urban workers. Human relations68(3), 329-  352.

Kochan, T. A., & Riordan, C. A. (2016). Employment relations and growing income inequality: Causes and potential options for its reversal. Journal of Industrial Relations58(3), 419-440.

Louis, H., & Urcan, O. (2017). Employment protection legislation, investment, and firm performance.

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