Can you move them to a non-management role and reduce their pay? Is that allowed?
In most cases, yes. As long as you don’t have a contract with the employee guaranteeing them a certain position or rate of pay, you can transfer them to a different position and pay rate for which they’re better qualified. Such employment decisions are up to your discretion.
That said, demotions aren’t always the best course of action. You’re out the money you invested in hiring this individual and preparing them for the management role, and they’re likely to feel embarrassed and possibly resentful. If the employee could perform better with training or coaching, a little additional investment here might save you money in the long run and earn you good will from employees.
If a job transfer is the right move, however, it’s a good idea to document the performance issues, skills gaps, and knowledge deficiencies ahead of time—plus any measures you took to help the employee improve. That way you can show the legitimate basis for the employment decision if you were ever challenged on it.