Change of payment arrangement

Caroline Mboijana

What you need to know:

  • Being a salaried employee provides employees with a sense of security.

What legalities come with changing an employee’s payment arrangement?
Management is considering changing one of our salaried employees to an hourly pay. Can we do this without breaking any employment laws? Stephen

Hello Stephen, this adjustment in how you pay can be made. However, you will need to ensure that you are making the transition carefully. Many organisations have had to adjust employee contracts as a result of changes in business activities etc.  

While your question has only looked at changing how remuneration is calculated, I believe there are other factors that you will need to consider. There needs to be a clear rationale as to why you are making a move, and this must be clearly communicated to the staff member.

Changing from salaried to hourly rates suggests that other aspects such as type of work, hours of work have also changed. When you switch to this new mode of calculating pay, your work schedule must be well organised, so aspects such as overtime are managed carefully. 

You must review the current contract and determine that you can make the changes that you are proposing. 

Note that a move from salaried to hourly rate also means that other benefits such as medical allowances will need to be adjusted. Likely, you will also have to change the entire contract to speak to the new ways of working. 

In addition to reviewing the contract, you may want to check the labour laws as certain aspects will also be applicable if the employee is working fewer hours per week than stipulated in the Employment Act. Speaking with your legal point person would help you understand some legal aspects that need to be factored in in the adjustment.  

Making these changes will require you to communicate the reason for the change clearly and that your employee understands this adjustment. 

If it is not communicated, you will have a disengaged employee who will not be focused on delivering their work.  

Being a salaried employee provides employees with a sense of security.

Moving to hourly pay and if not managed well will cause them to be anxious, and they may start looking for an alternative job. 

If they are a good team member, you may create a risk of losing a good person. Good luck

Caroline Mboijana,
Managing Director, The Leadership Team (U)