Can You Cut an Employee’s Salary or Hours Due to Financial Trouble?

Know the Law Before You Act

When business is tough, especially for small companies with only one employee, it’s tempting to look for quick fixes — like cutting salaries or working hours to stay afloat. But South African labour law is clear: you cannot just change an employee’s conditions of employment unilaterally, even if your company is in financial distress.

Let’s unpack what you need to know before taking that step.

⚖️ You Can’t Do It Without Consent

If you have an employee — even just one — you cannot legally reduce their salary or working hours without first getting their informed and voluntary agreement. Changing these key terms without agreement can lead to:

A breach of contract claim;

A labour dispute for unfair labour practices; or

An automatically unfair dismissal claim if you force the change or fire the employee for refusing to accept it.

🏢 When Financial Trouble Hits: What You Can Do

If you're trying to save your business, and reducing working hours and pay is the only viable option, the correct process is to follow section 189 of the Labour Relations Act — the retrenchment procedure. Yes, this applies even if you're a one-man operation with a single employee.

📝 The Right Way to Do It

Here’s a simple breakdown of what you need to do:

Give written notice to your employee that you are considering changes due to financial constraints — this is called a section 189(3) notice.

Start a consultation process: Sit down (formally) with the employee and discuss the situation. This is not just a courtesy — it’s a legal requirement.

Talk through alternatives like:

Reduced hours with reduced pay

Job-sharing

Temporary layoff

Unpaid leave

If the employee agrees, sign a written agreement recording the new terms.

If there’s no agreement, and all options are exhausted, you may proceed with termination for operational requirements — but only if the process was fair and all alternatives were genuinely considered.

⚠️ Don’t Risk Costly Mistakes

Skipping this process or making unilateral decisions can land you in hot water with the CCMA or Labour Court. You may be ordered to pay compensation, reinstate the employee, or even face penalties for unfair dismissal.

✅ Bottom Line

If your business is struggling, reducing salaries and hours might be part of the solution — but it must be done lawfully. Get proper legal advice and follow the process. Consult. Engage. Document.

Need help drafting a section 189 notice or employee agreement? We’re here to assist.

📞 Contact Advocate A.R. van der Merwe, Trust Account Advocate, for tailored legal support that gets it right the first time.