Can an Employee Turn Down a Pay Raise?

Many workers get excited about a salary bump or the prospect of a promotion, but what should an employer do if a worker declines either? Here’s what employment attorneys had to say.

Each employee’s request should be assessed individually, but if the worker is being paid according to the law, it would be unusual if the employer faced legal issues for honoring the employee’s wish to decline a promotion or salary increase, said Bill Nolan, an attorney with Barnes & Thornburg in Columbus, Ohio. 

[SHRM members-only toolkit: Determining Overtime Eligibility in the United States]

“Occasionally, we see an employee declining some financial benefit because of how the employee thinks it might affect a divorce, custody or child support proceeding,” Nolan said, noting that an “employer should not provide untruthful information to any government entity and should in no way assist an employee in doing so.”.   

The biggest mistake employers make in this area is agreeing to pay employees outside of their W-2 income or “under the table,” noted Tracy Miller, an attorney with Ogletree Deakins in Phoenix. Helping an employee hide income to obtain government benefits, avoid wage garnishments, or avoid alimony or child support orders can expose the employer to civil and criminal liability, she cautioned.

Reasons Vary

As unlikely as it may seem, there are many reasons an employee may not want to accept a pay raise or promotion. An employee may decline the raise because it’s attached to a change in an employee agreement, explained Michael Galey, an attorney with Fisher Phillips in Philadelphia. For instance, an employer may offer to increase a worker’s pay and in exchange ask the worker to sign a noncompete agreement. In that case, an employee may decide that refusing the raise is preferable to being bound to that agreement or other restrictive employment conditions.

Some employees refuse a pay increase because they believe it will come with additional responsibilities and expectations or make their position more vulnerable in the event of a layoff, Miller noted.

Another reason an employee may refuse a pay increase is to remain eligible for certain government subsidies, such as housing assistance or child care vouchers, Nolan said. 

Many low-wage earners rely on government benefits to make ends meet. If a pay raise puts them over the income threshold for those benefits, and, as a result, their benefits are reduced or they lose the benefits, they’ve been negatively affected by this “cliff effect,” explained Susan Crandall, Ph.D., a clinical professor and director of the Center for Social Policy at the University of Massachusetts in Boston.

Many workers in the retail, food service and home care industries may be especially vulnerable to the cliff effect, because they generally work in lower-paid jobs and need government support, she said. They may turn down opportunities that seem promising on the surface, such as working more hours or a promotion to supervisor, for fear that they will lose their benefits, she noted.

Managing the Situation

There are no federal laws that would obligate an employer to give an employee an unwanted pay raise. But HR should document—preferably with the employee’s signature—that the employee refused the raise, Galey said. That way, the reason is recorded if the employee later complains that he or she is being paid less than similarly situated employees.

Nolan suggests obtaining a written confirmation from the employee stating:

• The employee is voluntarily declining a pay increase for personal reasons.
• The employee’s decision is irrevocable.
• Any current or future raises or benefits will be based on the employee’s current base salary, and the declined raise will have no impact.

If employees are covered by a collective bargaining agreement, the terms of that agreement will control when and how they get paid, Galey noted. 

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