A demotion normally involves a reduction in rank or status, or a decrease in job responsibilities and/or salary. An employer may wish to demote an employee for a variety of reasons including poor performance, capability and/or as an alternative to termination.
Regardless of the reason for the demotion, an employer should be careful when demoting an employee. Any demotion should be managed professionally and lawfully; failure to do so may expose the employer to an unwanted claim.
Employer's right to demote?
Variation clause in the employment contract: The employment contract may contain a clause which allows the employer to unilaterally vary a particular term or condition without the employee's consent. However, unless the clause expressly provides for demotion of any employee, it is arguable whether the employer may demote the employee without express agreement.
Employee's express agreement: If the right to demote is not found in the contract, an employer may demote the employee by agreement. An employee may choose to agree to a demotion as an alternative to retrenchment or termination. If the employee is agreeable with the demotion, the employer should record the agreement in writing.
Practical tips for demotion
Have a conversation with the employee about the demotion
Any conversation should take place in a private setting. The employer should provide a thorough and honest explanation for the demotion. For example, if the reason is performance related, the employer should have evidence readily available to support its argument. Both the employer and employee should document the discussion. The employer should also answer any queries the employee may have and be prepared to entertain other proposals, such as a request for a trial period for the new position or for some time to consider the new position...