Negotiating a Pay Cut?

csb asks: "My employer will probably ask me to take a pay cut in order to prevent (or at least minimize) layoffs. I want to keep this job; but, I don't know what to request in return for accepting a temporary reduction in salary. Is this a negotiation? What questions should I bring to the table? Which issues should I stand firm on, and what should I let slide? Are there some resources out there about this sort of thing?"

Comments

Do it.

[eric2hill]

The way I see it, you have two choices:

1. Take the pay cut, no matter how much it is. Let them pay you to find another job. Stay with them until you have a better offer.
2. Tell them you'd rather be fired. Then draw unemployment. I could deal with a 10 month paid vacation right now...

First Post?

Re:Do it.

[daverk]

I agree.

Most companies don't recover. Except for some types of manufacturing where layoffs are common and are made up by having lots of overtime when production resumes.

1) Take the pay cut and look for a new job.

2) Once you have a new job lined up. Ask your current employer for compensation for leaving voluntarily.

Finding a job when you are layed off is much harder then when you are currently employed. Also they will offer you less than if they think you need the job.

Negotiating a Pay Cut

[Anonymous Coward]

First, I'd try to find out if other employees have been asked to take a pay cut, and if so, how much. You shouldn't be asked to take a larger pay cut (percentage-wise, at least) than anyone else. In exchange, you should ask for additional training to keep you useful to your employer (and marketable to other employers, if necessary). I assume your benefits won't be touched, only your salary; if this is not the case, you should definitely keep health insurance off the table.

Few tips

[SuiteSisterMary]

Find out if it's a pay cut, or a temporary reduction. Get, if you can, in writing, an agreement that when financial condition X is met by the company, salary will go back to normal, back-pay will be coughed up, etc. Try to get time off/vacation in leiu of. Start looking for another job; everybody else will be. And some of them will leave. Those that are left will be asked to do more. They'll get pissed, look for a new job. Vicious cycle.

other possiblilities

[wmulvihillDxR]

You say that you want to keep this job, so I'm going to assume that you are truly interested in this job, having fun, and think this company is going somewhere. Here are a couple of options to think about:

1. If you really think that this company is going somewhere and that these layoffs are a temporary measurement, you could negotiate for some stock in the company. Pros: If the company really does get through this and becomes wildly successful, you've just taken care of everything. Also, it gives the managers a warm fuzzy to know that you really do think the company will be successful. If the company is large enough, then giving up a little bit of stock (like 1% or something low) is no skin off of their nose and, more importantly, its no cash out of their pocket. Finally, if the company really does tank, its not like you actually "bought" the stock and had it die. Cons: Some companies will not even "go there."

2. Negotiate "minor" perks. You probably know what I mean, longer lunch, telecommute one day a week, faster computer (before you refute me on this one, remember, they can spend up to $500, tax-deductible, on equipment), etc.

Anyways, those are my suggestions. Good luck!

Re:other possiblilities

[Anonymous Coward]

Excuse me? If the company is *large enough*, 1% is a HUGE amount of stock. Additionally, one must take caution to avoid being in a position of responsibility to creditors should the company go under.

Re:other possiblilities

[Anonymous Coward]

dumbass, owning stock in a company doesn't make you liable for the company's debts!

Let them lay you off......

[jsimon12]

I would let them lay you off, assuming they will give you a nice servrance package or some sort of compensation. If you agree to a pay cut, then you may end up forfieting proper compensation. If they aren't giving a severance package, take a pay cut and find another job, cause odds are this place is going down HARD!!!!!!!!!!!!!!!!!! Oh and whatever you do, don't let them pay you in stock, unless you are out of toliet paper, cause it probably won't be good for much else.

Re:Let them lay you off......

[Johnny5000]

"Oh and whatever you do, don't let them pay you in stock, unless you are out of toliet paper, cause it probably won't be good for much else."

It depends... if you think the company is going out of business, then yes, the stock will be worthless. But, many traditionally successful companies are feeling the pinch of the current economic times, and are laying people off. In a few years, the economy will be better, the company will be back on its feet, and the stock will be as valuable as ever.

-J5K

Re:Let them lay you off......

[jsimon12]

No offense but I think you are in total denial. The odds of this company being a diamond in the rough are astronomical. But then again, a great many people play the lottery. Maybe schools should make statistics a basic requirement in highschool. Sure, if somehow the company is one the greats just having problems then sure take stock, but lets be honest here, it is unlikely if they are asking people to take pay cuts that they are headed for great things. I talked to a buddy that does corporate outplacement, and he says when they ask you stuff like this, you can pretty much be 99% sure the company is gonna tank. If you want your future riding on that 1%, by all means listen to this guy.

Re:Let them lay you off......

[Johnny5000]

He didnt say what company he worked for... If he works for used-styrofoam-peanuts.com, then I'd say bail, and bail fast. The guy who wrote the question should have a decent idea of how much financial trouble the company is in, and whether or not it might be worth taking a risk with the stock. But I stand by what I said- if the company is going to survive this, then stock might be a decent idea.

in the 80s GM negotiated a price cut for their workers... of course they eventually used the money they saved to build factories in mexico, which sucks for the workers, but the GM stock recovered nicely. At least then I guess he would have stock to sell to buy groceries, before selling the car, matress, and blood.

-J5K

Re:Let them lay you off......

[legoboy]

No offense but I think you are in total denial. The odds of this company being a diamond in the rough are astronomical. But then again, a great many people play the lottery. Maybe schools should make statistics a basic requirement in highschool.

(Referring to taking stock options as compensation for a paycut.)

This might not have helped all those .com workers who dropped out of high school in order to strike it rich in "web content" companies...

Pay cut

[Anonymous Coward]

1) Get it in writing that this is a temporary pay cut and after the company gets to financial position X your pay will return to normal.

2) The other tact you could try is to have your pay stay the same on paper, but ask that the difference be reinvested in the company. You get an ownership position, and on paper your pay stays the same, so if you have to go on unemployment or get a severance package, you should be able to get benefits based on your pre-cut paycheque.

Re:Pay cut

[jsimon12]

I guess most people here seem to miss the point. But then again I am an engineer and I like to be loyal to my job too. But when it all boils down to things you need to cover your own ass, and feed your family. So lets be truthful, is staying on the ship when you know it is going down really such a good idea? I guess it would help if we had a little more info on the company? Can someone provide that?

Re:Pay cut

[csb]

More info: I work in a small local office with a tightly knit team of people whom I have worked with before. I genuinely enjoy being with my team, this is what makes me get up in the morning.

In addition, my employer has generous benefits, including an emphasis on training and education. There's a lot of room for growth here, if we can make it through the current tribulations.

The company is IT professional services, so when we're billable, we can do little wrong; but, when we're not billable, we can do little right. Part of the problem is a legacy of poor salespeople.

This month, we found a new salesperson who shows great promise. I think that he'll have our office showing signs of life by year's end. In summary, it just isn't time to give up yet.

Of course, I'm keeping an eye on the job market; but, things are quite slow in my city. I would much rather tough it out with my crew than to hit the streets and fight the crowds.

We have savings, so if I have to take the pay cut, it wouldn't hurt too badly, I suppose. I would ask to get the difference back after business improves -- there ought to be a reward.

In sum, I don't think that my company is going down. They're just finishing a large reorganization, so I think that some of the chaos is coming from that, not just the recession.

I may be sentimental; but, I also think we can survive. I don't like changing jobs any more than I have to, and I definitely want to stay with what I think is a fun and very talented team.

I am fortunate

[Red Aardvark House]

My current job had a much higher rate of pay than my previous so I accepted it as a part-time position, which later grew to full time. If my pay is cut, then my hours will be scaled back as well. Hopefully things won't be too tight so that I couldn't enjoy a little "working vacation" here in Florida.

Alternative to a pay cut

[webmaven]

There is an alternative to reducing your pay rate, and that is to reduce the number of hours that you're working, and pro rate your salary.

This has several advantages; First, while it reduces the number of hours that you're working, your productivity will probably go up. Second, it provides a clear boundary condition for re-increasing salaries once the company has found it's footing, ie when your hours are brought back up. Third, it allows those employees who need the missing income to make it up through consulting work without increasing their workload to the point that the productivity in their main job suffers.

This is a much more equitable proposition, with a straightforward quid-pro-quo that balances the advantages and disadvantages for both the employer and employee.

The simplest way of implementing this is to either mandate three-day weekends (starting Friday), which is a 20% reduction in work hours, and a corresponding 20% reduction in salary, or a less drastic approach would be to let the individual employee choose a day of the week to make a half-day, which is a 10% reduction.

Re:Alternative to a pay cut

[Anonymous Coward]

First, while it reduces the number of hours that you're working, your productivity will probably go up.

I can confirm that. For the last few months, I have been working 4 hours per day instead of 8 hours per day. I'm getting just as much work done.

I hope the boss hasn't noticed, 'cuz I wanna go back to 8 hours of not working very hard, for twice as much money.

Reduced schedule?

[RTHeath]

I would consider asking for a corresponding reduction in working hours. A good friend works for General Datacomm, and they instituted a 4-day workweek (20% paycut) to cut costs.

If you can afford a partial paycut in exchange for fewer hours, take the time and enjoy it. It worked out great for him -- he was able to spend a lot of time with his wife & young daughter that he would never have done otherwise. There aren't a lot of times during the course of a career that one is given the opportunity to back off and focus on what's really important in life. And especially after the unbelieveable pace of the last 5-8 years, it's good to slow down a bit and take a breather if you have the chance.

Re:Reduced schedule?

[thogard]

Most compaines have rules that say if you don't work 40 hrs/wk your not full time and you don't get the extra benifits. Will taking the 4 day workweek mean you don't get insurance or vacation time?

Re:Reduced schedule?

[Anonymous Coward]

This cowardly response comes from Canada...
I would be very wary of this being a short term fix to financial trouble - it sounds all bad. Remember, "Nice guys finish last". Consider this though...
I currently work in IT at a large law firm 4 days a week & have a full time employment status. Many firms up here have a 28 hour minimum for full time employment status. Where you get caught is now that you're working 80% of "full time" hours, you get 80% of holiday time (12 days rather than 15...). I haven't checked into long term disability benefits, but I would base that on 80% as well. Dental & other benefits are uneffected. One other problem that may arise is if you are in fact laid off, your unemployment claim may be based on what you earned in your last (xx) weeks of work not what you were earning before the reduction. There is probably a maximum amount that you can receive in benefits, but be wary of the potential for reduced unemployment $$'s if you reduce your work hours.
I use my free day to relieve stress by working as a contractor at a smaller law firm - works great!
I wish you courage & clear thinking.

They're TELLING you they're cutting your pay??

[MagikSlinger]

Man, are you ever lucky! We got to find out from an industry rumor site 4 hours before they announced it.

I really, really wish I was kidding...