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Table of Contents

Take care of your people and protect your business

The idea of demoting an employee may be worrisome. Demotion is a delicate process that can strengthen or destroy the employee’s relationship with the company. Read on for best practices on how to guide the process positively.

What Is a Demotion?

A demotion is when an employee is moved to a role with less responsibility within the same company—usually with a lower title and/or salary. A demotion may occur because of poor job performance, a restructuring of the organization, or at the employee’s request.

Should Companies Demote Employees?

Demotions should be considered very carefully and on a case-by-case basis. There’s no one-size-fits-all for demotions. While it may help some employees, it can destroy the morale of others. Consider the work ethic, personality, tenure, and engagement of the employee carefully before deciding if demotion is the correct course of action.

A demotion should be a rare occurrence.  A performance improvement plan or termination of employment may serve the situation better.

Additionally, before demoting any employee, review their contract to ensure no language prohibits such a move. Discuss the situation with a legal contact prior to making the decision so they can provide insight into any potential issues.

Let’s consider a few of the pros and cons of demotion.

Pros of Demoting Employees

  • Maintain institutional knowledge. A tenured employee who has been employed at the organization for a long period of time will likely have institutional knowledge that cannot be easily replaced.
  • Demonstrate growth flexibility. Sometimes, a promotion is not the right career move for the individual or the organization as a whole. When this happens, it’s beneficial to demonstrate that the culture of the company is to ensure that people can be successful in their role. Otherwise, when an individual is hired into a level they’re not ready for, they may fail slowly and eventually quit or be fired. This can lead to highly negative impacts on the culture of the organization.

Cons of Demoting Employees

  • Won’t fix all problems. If an employee has performance issues or is disengaged, a demotion is not likely to resolve the situation.
  • Possible increased dissatisfaction. If an employee is disengaged in their current role, moving to a role with less responsibility and likely less pay will only serve to increase the discontent.
  • Inconsistency concerns. Typically, when an employee has performance-related issues, they should be coached to success or terminated from their position. If one employee is selected for a demotion while historically such situations have resulted in termination, a question of consistency may arise. A consistent company policy can help with this concern. Ensure the policy outlines under what circumstances an employee qualifies for a demotion.

Reasons a Demotion May Happen

Demotions can occur for multiple reasons. Each situation is different and should be considered on a case-by-case basis.

Performance Concerns

If an employee has demonstrated strong performance in prior roles, a demotion to a previous role may solve current performance issues.

Reorganization

If a reorganization of the company occurs, the new structure may not retain the employee’s current position. If they’re a valuable asset, demoting them to an available role will allow the company to retain industrial knowledge and allow a chance for employee development.

Employee Request

Occasionally, an employee may request a demotion. This can occur if the job responsibilities of their current role are too demanding or if personal circumstances require less stress or different responsibilities.

How to Demote an Employee

Demoting an employee is a delicate situation that must be handled in an empathetic and transparent way.

Step 1: Be Respectful

If the demotion isn’t an employee request, this discussion will likely be uncomfortable for the employee. Communicate to the employee that the organization values them and wants to retain their skills and knowledge.

Step 2: Communicate Reasons for Demotion

Clearly communicate the factors that contributed to the demotion decision. Specify what performance-related concerns were a factor.

Step 3: Outline New Position

Outline the specifics of the new role. Walk through the responsibilities and expectations. If a pay reduction is part of the demotion, communicate it clearly.

Step 4: Be Prepared

The employee will likely be emotional or defensive during this conversation. Be prepared to handle questions or feedback in a professional manner. If the employee becomes too aggressive, be prepared to have them escorted out of the office.

Step 5: Communicate

If the employee agrees to the demotion, create a communication plan with them. Decide who will be told, when the demotion will be communicated to the team, and what information will be shared. Do your best to ensure the employee retains dignity throughout the transition.

Tips for Helping an Employee Adjust After a Demotion

Tip 1: Set New Expectations

Provide the employee a new job description with the roles and responsibilities clearly laid out. As these should have been discussed during the demotion discussion, they will come as no surprise to the employee. Ensure that the manager also communicates performance expectations for the new role.

Tip 2: Be Empathetic

Transitioning to a different role will likely be uncomfortable for the employee. Check in with them often to see how they’re doing and in what ways you can support them.

Tip 3: Watch for Negative Reaction

Keep an eye out for negative consequences. This may be the employee complaining about the company to co-workers, putting little effort into their job, or actively sabotaging projects. If these situations occur, communicate with the employee and set expectations of professional behavior. If the negative reaction continues to cause issues on the job, termination may need to be considered.

Tip 4: Provide a Path

Give the employee something to work for. If greater autonomy or a new position are options, ensure the employee knows what expectations need to be met to reach that goal.

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Questions You’ve Asked Us About Demotion

Yes. If an employee is having performance issues or is part of a restructure, a company can legally demote an employee. However, be cautious that no discrimination is involved in the decision. Consult with a legal contact prior to implementing the decision.
Mostly likely, yes. Depending on the contract language of the employee, a change in pay to align with others in the demoted role is legal.

Alaura is an espresso-addicted HR professional who loves improving processes and providing the best experience to employees. She focuses on performance management, compensation best practice, and leadership coaching and strategy. When not working, she loves playing video games and making sourdough bread.

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