When people hear the word “demotion” there usually is a negative connotation that goes along with it. Despite what many people may think, a demotion is not always a bad thing for several reasons. Demoting an employee can be used when an employee has been promoted too quickly and they do not have the skill set to perform their new tasks, as an alternative to a layoff, and it can also be used as a form of disciplinary action. Even though demotions are not a regular occurrence, as a manager it is always a good idea to have a demotion policy in your employee handbook. This way the actions that may result in a demotion are clearly defined for both the employees and the managers.

The first and most common use for a demotion is to relieve an employee of jobs or tasks that they do not have the ability to properly handle. This form of a demotion can be the key to helping somebody who has been promoted beyond their capabilities. For example, a lot of companies like to promote their employees from within the organization so that they can have a better understanding of how the organization operates. Although it probably does not occur too often, there is always the possibility that an employee will be promoted beyond his/her capabilities. This occurs most commonly with individuals who are promoted into their first position in management, where they are not only responsible for themselves, but also responsible for managing the performance of their direct reports. Instead of firing the individual it is much more logical to give that employee their old responsibilities back. Many people may think that this will upset the employee, but if he/she is really that overwhelmed, they will most like welcome the reduction in responsibility with open arms.

Another important use for a demotion is to help hold onto quality people within an organization, especially during a time when the company is reorganizing or downsizing. Every company will hit rough patches throughout its business cycle and they will have no choice but to cut back on expenses, including employee salaries. One way to hold on to managers who are performing, but are making too much money, is to demote them. Most employees might see this as a negative, but with the proper explanation they might realize how this can be perceived as a positive opportunity. As a manager, it is important to explain to each employee why they are being demoted so that they realize that they are an important asset to the company, and that the company is still very interested in their skills.

Demotion can also be used as a form of disciplinary action, but for the most part this is not a common practice. This is why it is important to have a demotion policy in place in the employee handbook so that employees will understand that, if it comes down to a demotion, they are not just being demoted for disciplinary purposes, but the demotion can also be a positive thing. Employees will see that they can also be demoted because the company has a very high interest in the skills that the employee offers the company and that they are simply being demoted because the company has to consolidate its ranks do to issues outside of its control. This is why it is important to spell out guidelines for employees in their hand book to help give them a better understanding of the processes and the reasoning behind a demotion.

There are also several risks that are associated with demoting employees, which is another reason why it is important to spell out the demotion policy in an employee’s handbook. The first and probably most dangerous risk is that an employee who has been demoted will become angry especially if they do not have an explanation for why the demotion has occurred. An unruly employee can be disruptive to the processes in the workplace, can sabotage production, and even become violent in the worst case scenarios. By spelling out guidelines and reasoning for a demotion, employees will become more understanding of why they were demoted, hopefully avoiding problematic situations. Demotion policies are also used by companies to help avoid discrimination against employees. If guidelines are clearly established, it will help all of management maintain the same procedure with every employee.