I wonder why employers don’t just make across-the-board salary cuts rather than layoffs. In my previous job there were ten of us in my department and it was announced that headcount had to go down by one. Other groups also had to lose one or two people. Now in my current job again heads are being lopped off - specifically the top wage earners.
Instead of chopping one head and lose the productivity, why not take the salary of that position and divide it by the number of people in the group and offer to keep everybody employed but at reduced salary. This might not be feasible for low wage earners who are just scraping by, but it certainly wouldn’t hurt many upper management people to make $67K instead of $75K (checks forum - yeah IMHO) especially if it comes with assurance of continued employment for all.
I think I’d take a 10% cut in my wages in exchange for the assurance that nobody in my group would get fired.
I’ve fired my share of people during staff reductions. There’s always a couple of people you’d like to let go but they hang on as long as noboey presses the issue. But once money is tight, why make the good performers suffer to save the slackers or contrary people they’ve had to carry?
So you’re saying there are often performance based reasons for letting people go. Of course that’s true and I conveniently factored that out of the OP. But suppose you had a wonderful team of ten upper level managers, all of who were doing pretty good as far as job performance goes. Wouldn’t the salary-cut-for-all be a better option than a smaller workforce?
I think it also depends on the benefits. Even if everyone took a 10% pay cut, the employer still has to pay medical, sick time and vacation pay. This can really start to add up
It would (or should) depend what the job market is like in one’s field and area. If there are other companies hiring people like me, at close to the same wages as I was making before, then I’d prefer the 10% chance of getting fired, because if that happened, I could just take a different job. On the other hand, a guaranteed pay cut might not leave me that option.
If, however, the job market in my field is lousy, then that 10% chance of getting fired would amount to a chance of ruination (or at least, severe hardship) for me and my family, which would probably not be something I’d be willing to risk. Better to suck it up and accept the pay cut.
It really depends on the scenario; I think this whole 10% thing is a little simplistic.
I think that my company (this was before my time) temporarily dropped everyone’s salary after 9/11, so that the company could survive a lousy climate. This was accompanied by a real rough time for everyone in the industry and the CEO dropping his salary by a far greater percentage than any of the employees, which would have limited the impact on moral. This was a fairly small percentage for the employees and in an environment where it would have been really rough to find another job.
But in an environment where it is just the company going through bad times, or a merger, or just pleasing Wall Street, I believe the salary cut will be far more damaging than just letting the worst performers go. A 10% pay cut would be enough motivation for employees to try finding another job, and your best performers will be in a better position to do this and will probably be the ones to leave. You’d be in a far weaker position than if you had chosen who was going to leave yourself.
It might be different at my company, which is somewhat specialized software, where people who have been around a few years are a lot more productive than those that haven’t. Losing the people who will be most upset by the pay cut would be very damaging.
I would take a 10% chance of being fired. And if they cut my pay I would send out my resume immediately.
I’m guessing employers prefer to layoff some because they would prefer to control who they let go - rather than lose the people who are good enough to find another position.
I agree that salary cuts are very, very bad and should not be considered in any normal circumstances. My current company transitioned me from a contractor to a full time employee although the salary cut was 20%+. I resisted but I liked the place so I stayed but it is a real hardship now even though I make good money by most standards. I am a top performer but a 10% pay cut would mean that I could not meet my household obligations and have to eat bread and water for lunch literally because I have two small children and a home.
Demoralizing employees is very real and people will still start to bail like they are passengers on the Titanic. Shades of communism are evil and born from brain damage and this idea smacks of it so it would be shunned by anyone that hears the idea. The most common method is better. Either weak employees or weak departments can be culled so that the blow affects them only and they can move on to something better. I know what I speak of because it has happened to me twice. You just have to move on because in this era, nobody gets a job for life.
I’ve been through both, several times, and in my experience companies that try cutting salaries across the board only ever try that strategy once. If they survive, which they often don’t after the subsequent exodus, they learn to cut headcount the next time they need to tighten the belt.
It works the other way as well. In a good job market, a 10% paycut is basically telling your best employees “please go find a different job” while the worst employees stay on. In a bad job market, everyone will stay, the problem being that when the market picks up, you’d better hope business does as well because your employees will remember that paycut - and the good ones will leave if you don’t make it up to them.
I may be an exception, in that I was caught in a RiF but hired back as soon as things turned around, but in this industry if the company is hurting that bad there isn’t going to be work for all the people who were saved so there’s no point in keeping them around. And it sure seems like there’s always someone you want to be rid of.
Given a choice between a pay cut and a layoff? Depends on the severance package. Layoffs suck, but a decent package can really change things.
Crappy severance - 10% cut and I’d spend all my time looking for work.
Good severance - layoff and I’d still spend all my time looking for work.
I’d take a 10% cut if I liked my job, benefits, boss and co-workers. Getting a new job has too much chance of getting the boss from hell or a bunch of monkeys are cow-orkers.
My workplace cut one of our (many) combined vacation and sick leave days rather than go through layoffs. That’s far less than a 10% pay cut. Considering that raises are typically less than 3% per year here, a loss of 10% would be tremendous.
Five years ago, I probably would have sucked up the pay cut. At that time, I’d been through a long stretch of un- and under-employment, lack of anything really impressive on my resume beyond my college degree (which is of negligible value in your 30’s), and general uncertainty about the future.
Now, I have more substantial accomplishments to put on my resume, and a lot of experience working in cooperation with other companies in the same field (we specialize in a narrow field of work, so all the big guys come to us to help on those parts). And since the pool of native English speakers who can work in Japanese and have 5+ years of experience in creative writing and editing is very limited, the supply/demand advantage is on my side. Plus, I have enough of a nest egg built up to cover all our household expenses for an extended period, removing the desperation element from the job hunt. I’d take the risk of firing over a pay cut.
I’d take the chance of getting fired. There really is never a situation with 10 people at the same level who have equal performance. There are always some performers that are weaker than others and I make sure I’m in the top group.
The entire salaried staff at one of my employers were given the option of taking a 25% cut in salary for at least a quarter or being placed on layoff status; we were also informed there would be no guarantee that laid off salaried people would be recalled. We were also informed the cut in salary might extend beyond one quarter. As best I recall, all the salaried staff took the cut in pay, albeit not graciously. I had just bought a house and a 25% cut in salary was hard to live with. It worked out in the end, but it was a rough three months.
Just to set the time frame, this took place soon after Bush the First was inaugurated.
I think there’s only one circumstance where I would be ok with the salary cut … and in fact, I’ve gone through it.
About five years ago, my workplace went through a big financial crisis - we were just a startup then, we had a product and it was selling, but we were running through our initial capital faster than we were getting new orders. There was a big black hole coming up in just a few months, and the company might have folded.
So everyone agreed to cut back to 4 days a week, at 80% salary. A few people had to be made redundant too, but that prevented one or two more sackings. We weren’t swamped with work, which made it all possible, we just had to hang on till we got customers for the stuff we’d already done.
Later, when we were out of the hole, a couple of the redundant guys came back, and everyone (who wanted to) went back to full-time.
It would have to a VERY bad job market before I’d accept a reduced wage for the same amount of work.