Is it a violation of labor laws to deduct performance based wages?

Mondo Workplace Updated on 2024-03-07

In today's enterprise management, the design of compensation structure is complex and delicate, especially when performance pay is included as part of employee income. This practice is widely used in many organizations to motivate employees to be more productive and productive. However, the uncertainty of performance-based pay and its relationship with labor law often becomes a difficult problem in enterprise HR management.

First of all, let's take a look at the legal basis for companies to deduct performance-based pay. Historically, the Regulations on Rewards and Punishments for Employees of Enterprises have provided a legal basis for the employer's right to impose fines. However, with the repeal of this regulation and the implementation of the Labor Law and the Labor Contract Law, the power of employers to impose fines on employees has been restricted. This means that unless there are laws, regulations, rules, or labor contracts and collective contracts, enterprises are not allowed to arbitrarily deduct employees' wages.

In 1982, Article 12 of the Regulations on Rewards and Punishments for Employees of Enterprises promulgated and implemented stipulated:

Administrative sanctions against employees are divided into: warning, demerit, major demerit, demotion, dismissal, probation, and dismissal.

A one-time fine may be imposed at the same time as the above-mentioned administrative sanction is imposed.

Article 16 of the regulations also stipulates that the amount of fines to be imposed on employees shall be determined by the enterprise, and generally shall not exceed 20 percent of their standard monthly wages.

In the definition of performance-based pay, it is considered as a type of variable pay based on the employee's work performance. In order to legally and effectively adjust the performance salary through performance appraisal, the following conditions must be met: the democratic formulation and publicity of the performance appraisal system, the clear knowledge and consent of employees, the agreement between the two parties on the performance salary part, and the reasonableness and legality of the appraisal content.

So, what should HR pay attention to when evaluating and issuing performance-based compensation? The key lies in the rationality, fairness and transparency of the performance appraisal system. This includes not only the formulation and implementation of the system, but also the confirmation of the assessment results and the feedback of employees. Only when the appraisal system is widely recognized, employees will feel treated fairly, which in turn will increase their motivation to work.

Salary adjustment is an important means used by enterprises to motivate employees and improve team performance. When making salary adjustments, the key points that enterprises need to consider include adjustment strategies, adjustment levels, adjustment models, and adjustment structures to ensure the internal fairness and market competitiveness of the compensation system. In particular, the adjustment of internal fairness needs to take into account factors such as regional differences, seniority wages, and equal pay for equal work.

In practice, a successful salary adjustment should be able to stimulate employees' enthusiasm and improve overall performance without increasing the burden on the company. However, excessive dissatisfaction often points to problems in the process of salary adjustment, such as improper adjustment strategy, inappropriate adjustment range or improper adjustment timing.

Dear readers, what do you think of what companies are doing when it comes to performance-based pay? What do you think should be the elements of a reasonable performance appraisal system? Feel free to share your views and experiences in the comment section.

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