Salary Reduction Letter Due to COVID-19 (Coronavirus)

Includes a free downloadable template for employers.

Salary Reduction Letter Due To Covid 19

July 31st, 2020

Due to the global Coronavirus pandemic, many businesses have been forced to temporarily reduce employee wages to avoid mass layoffs. A salary reduction letter is a document outlying the conditions for which an employee will have their salary reduced. The template below can be used to create a customized letter for your business.

Salary Reduction Letter Due to COVID-19

Download this salary reduction letter in MS Word format, change it to suit your needs, and use it right away.

Download Now Instant download. No email required.

Salary Reduction Letter Example:

[Company Name]
[Company address]
[City, ST ZIP Code]
[Date]

Notification of Salary Reduction Due to COVID-19

Dear [employee name]

I refer to our meeting on [insert date] about whether you would be willing to agree to a salary reduction from [insert amount] per [annum/month/hour] to a new rate of [insert amount] per [annum/month/hour].

As discussed, the company is experiencing a significant downturn in business due to the global COVID-19 (Coronavirus) pandemic [or state alternate reason]. In response, we are putting in place a [temporary/permanent] reduced pay arrangement to avoid layoffs.

If we do not obtain sufficient employee participation in the salary reduction program, we will have no option but to consider instituting a redundancy program that may result in temporary employee layoffs.

If you are willing to participate in the salary reduction program, please fill in your details below and return this form to [insert name] by [insert date]. If you have any further questions regarding this matter, please contact [insert name and contact details.]

Sincerely,

[Name and Title]

I agree to a [temporary/permanent] reduction in my salary from [insert amount] per [annum/month/hour] to a new rate of [insert amount] per [annum/month/hour] as proposed in the above letter.

Signed……………………………………………………………………...

Name……………………………………………………………………….

Date…………………………………………………………………………

Salary Reductions vs Salary Deductions:

A salary reduction is not the same as a salary deduction. A salary reduction is when an employee's salary is reduced by an agreed amount before any applicable state and federal taxes have been deducted. A reduction may occur when a business is instituting cost-cutting measures, when an employee reduces their working hours, or when an employee changes roles.

A salary deduction is a set amount that is deducted from an employee's monthly salary. Some deductions are mandatory such as Social Security tax and federal income tax, while others are voluntary such as retirement plan contributions and health insurance premiums.

More Resources:

FAQ's

What is a salary reduction agreement?

A salary reduction agreement is a signed agreement whereby an employee agrees to a reduction in pay.

Yes, a salary reduction is legal, provided the employee agrees to the reduction and the adjusted salary is above minimum wage.

What are the reasons for salary reductions?

  • A significant downturn in business operations.
  • Reduced working hours.
  • To avoid layoffs or furloughs.

What should be included in a salary reduction letter?

  • The reason for the reduction.
  • If the reduction will be temporary or permanent.
  • The current and proposed salary.
  • Contact details of an HR representative to discuss the reduction.
  • An employee agreement section.