If an employee is just not cutting it professionally, you might be forced to demote him to a lower-level position. This can be upsetting to the employee and result in an attitude shift in the workplace. It can also be a potential legal headache if you don't handle it correctly. Be prepared to manage this transition and look for ways to help the staffer regain confidence and career momentum. Suggest techniques for improving skills, and take a positive approach to helping him improve his professional performance.

Review the Employment Contract

Before you demote an employee, refer to her contract, if applicable, that outlines the terms of demotion as they relate to poor performance standards. You might be required to document performance problems, counsel the employee, and track specific instances of non-compliance with company rules and regulations before demoting her. If you demote the employee without following the parameters of her contract, she could have legal grounds to fight the demotion.

Determine the Demotion

Before you talk to the employee about the demotion, write a specific job description outlining his new role and responsibilities. Include who he will report to, who reports to him, and the specific tasks associated with the job. Also include changes to compensation, alterations to previous leadership duties, and other specifics related to job title, office or desk location, and the elimination of any perks that came with the previous position. Include a copy of the employee’s old and new contract with the revised job description as a reference, in the event the employee disagrees with the new terms.

Handle the Demotion Privately

Talk to your employee one-on-one in a private setting, preferably at the end of the work week to give her time to process the news over the weekend. Be specific in citing the reasons for the demotion. If you previously counseled her about performance issues, have copies of those documents on hand for review. State the terms of the demotion and the date the change becomes effective. Go over the new job description and performance expectations. Allow time for the employee to ask questions. Be prepared to deal with disappointment, anger, hostility or pleas for additional opportunities to prove herself in her previous capacity. Be professional, don't pass blame or judgment, but stick to the facts of the demotion decision. Consider having a human resources representative present for the conversation in case the discussion becomes contentious.

Announce the Change in Status

Issue a companywide memo at the beginning of the next workweek that outlines the change of position. There's no need to embarrass the staffer by characterizing the change as a demotion. Instead, simply note a change in responsibilities and provide details about his new title, reporting status and job responsibilities. Direct all inquiries about the change to yourself or an assistant who can be diplomatic in explaining the circumstances.