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"Industry Standard" Paycuts in IT?
noGarnishMe! asks: "I was just reading about a Chicago-based company that has told all its employees earning over $60K/year that they will have to accept a 50% percent paycut for the month of May. This cut might be necessary in these times but keep in mind that the bozos in senior management just finished buying up several failing companies and paying some large bonuses to themselves. The memo announcing the cut is here. This cut, coming in such large chunk and in May, seems like a draconian shot to boost the 2d quarter financials. True, the annual paycut of 3.8% is modest but it ignores that fact that many folks won't be able to pay their May bills with only half their salary. I know that many of us have been through rough times these past 18 months and so I ask, what has been the approach at your company?" There are graceful and non-graceful ways for a company to handle a lack of cash flow. In the scramble for survival, especially in an economic downturn, many companies are caught off-guard and have to show their shareholders that they are doing something to get the company back on the road to profitability (which seems to be the issue, here). In many of these cases, the group most affected by such changes are the employees. It would be interesting to note how many of you have gone through this before and what you had to do to survive the shortfall.
You have a contract that they can't change at will. So the best course of action is simply not to accept a paycut.
True warriors use the Klingon Google
When the bosses talk about improving productivity, they are never talking about themselves
It sounds like these guys have a severe short-term cashflow problem, rather than a longterm profitability problem... otherwise they could have asked staff to take the cut over the next six months, or take 2 weeks unpaiod vacation some time over the year, etc.
The real problem is that cashflow problems can be extremely hard to get over... and now they've probably alienated most of their remaining staff. I would hope that this comany tried their hardest to liquidate furniture, benefits, executive cars, office space etc before they did this, otherwise they'll have a mass exodus on their hands (which may of course be what they want).
In Europe, where I work, it's much harder to do something like this, for better or for worse; most countries don't allow unilateral cuts.
Alex.
Ah, computer dating -- it's like pimping, but you rarely have to use the phrase "upside your head" -- Bender
Solving cash flow problems in this way is _not_ a good idea. First, the workplace will rumble with the roar of resumes being printed and sent to competitors by all competent staff. Second, if the customers get a whiff of this (and they might), some may decide not to do business with a sinking ship and leave (or at least postpone any contracts), and put the company in ever more difficulties than before.
Better, actually, to acknowledge that the staffing is too high, and cut some staff outright. Better for the company, and, really, better for the staff that do not have to live in a constant state of anxiety and insecurity while trying to do their job. I mean, what do you prefer: get cut outright, with a couple of months salary in your pocket and free tolook for something better; or losing half your pay for a month, maybe for the next month as well, then maybe get cut anyway (or see the company collapse) and never see that money again - and all the while expected to do your job instead of having time and energy to search for a better one?
/Janne
Trust the Computer. The Computer is your friend.
I cannot see any other imaginiable explanation.
I have in the last week been offered a job at a significantly higher sum than their cutoff number, and as a counteroffer I have been offered by my current employer a 24% share in a spinoff of ourselves dedicated to the sales and development in my area of expertise.
The coffers of companies marketing and purchasing budgets are ovrflowing since the 911 hold on most big dollar activities. Companies are gearing up to spend.
If you have a product/service that sucks, or if managment of that company is so blind to have had too much belief in an idea and over employed based on those misconceptions of the product or its marketplace youre screwed.
Big money is moving, you just need to be in the right place to catch it. If youre not its managments fault. PERIOD. Now with that said, managment will find any excuse they can to mask their involvment in your current situation, the first is to blame the economy, but even that one is wearing thin with most.
Overexpansion, Overmanagment, Underselling, Overpaid salaries (although 60k isnt much for even a howler monkey)
I looked at the company in this article, I still cannot see what tangible product or service the sell clearly, THAT is a problem in my opinion and probably has something to do with their current situation.
I wonder how much of a Pay-Cut managment is taking ?
Sig went tro...aahemmm.....fishing........
Apparently the company never heard of the studies that correlate employee honesty and employee satisfaction. If you screw your employees, a few will come to believe that it's ok to even the score.
They also seem to have forgotten that the vast majority of the employees have NO stake in the company. They're probably not going to be thrilled to take a kick in the groin to shore up someone else's stock options.
Finally, in the memo, it says if you don't accept it, notify the company and they "may" terminate your employment. Guess that's one way to find out whether you're really irreplaceable!
Envy my 5 digit Slashdot User ID!
Yep, sure helps that your 'company' doesn't have to make a profit or worry about cash flow drying up. Being supported by taxation sure provides a comfy safety net!
Um. The company wants to become profiable by November, so they have 6 months, and they think cutting 1 months worth of IT salary is going to do it? 60/12=5 So Instead of paying out 5k per IT staff, they'll cut that to 2500. If they have 100 people, that's 250k. Anything less than that, I wouldn't consider worth the risk..
Besides, why would they need 100 IT people at over 60k?
Doesn't sound healthy to me..
My suggestion: GET OUT NOW
"I can't give you a brain, so I'll give you a diploma" - The Great Oz (blatently stolen sig)
We're a small web-development/consulting shop, and things have definitely been a little slow over the past few months. We've found the best ways to avoid it turning into a mess like the one linked include things like:
-Always keep your employees informed about the state of things: finances, workload, potential customers, potential problem areas. Big surprises are bad, dramatic changes are bad.
-Let everybody know that their loyalty and willingness to stay through rough times will be rewarded in the good times. But, complementing that, don't expect them to take their loyalty too far (i.e. to the point where they can't live their lives, pay bills, etc) - let them know that you'll support them in whatever adjustments they need to make, including leaving if necessary.
-Use the experience, skills, and wisdom of your collective staff to find new ways to bring in income, reduce expenses, and streamline operations without sacrificing quality. Having 1 or 2 people at the "top" trying to make all the right decisions is too much - include the people who will be affected by them in the process, especially when times get rough.
-Don't do anything stupid that will put you in court, jail, congressional hearings, or on the front page of the paper. Business ethics are business ethics, through good times and bad - whatever yours are, don't sacrifice them just to save this particular ship, even if it is cutting those icebergs a little close.
How's that for a dose of idealism? But really - honesty, trust, integrity and creativity will get you through a lot more crap than a 50% paycut for your employees will. It's worked for us.
The sad thing is, you would be better off being payed $57,501 to $59,999 than being payed $60k exactly. How silly.
BTW, anyone who is earning that kind of wage and still living from paycheck to paycheck is, well, a fscking idiot. There are families that earn $30k/year on a single salary with children and still save money. More to the point, if you're working in a high tech job right now and don't have an appreciable amount of cash in an "oh shit" fund, you're going to find out the hard way what a bad idea that is.
Having 3-6 months of living money (rent/mortgage, utilities, food, etc) in liquid savings (CDs are ok if done wisely, money market, savings acct, etc. but NOT stocks or mutual funds) is really something people should do. You can scoff, but when you suddenly find yourself unemployed, it's the people with these funds that are going to be fine and able to focus on finding a new job. The people without them will be visiting bankruptcy court.
My experience has always been that this type of crap is always followed by "save the company" pushes. Basicly, (we are laying off your staff)|(cutting your pay), but need you to work extra to take up the slack, and by the way, we have these new projects that need to go out faster than usual, because we need to save the company. If you don't work harder, faster, smarter, you will be out of a job too.
I'm glad I work for the government now....
room101 -- how much can you stand before they break you?
(they always break you eventually)
I've got redundancy insurance that will pay all my bills for the first 3 months I'm unemployed, as long as it's not my fault I got in that pridicament.
:-)
However I'f I had to take a 50% paycut or get fired I'd be screwed both ways, as there is no way I could live on half my salary for a month and the insurance Co. would be able to show that I caused my own redundancy by not accepting the pay cut.
I'd start looking through my contract at this point and see if there is any thing about time limits before announcing a pay cut.
That or by a shair or two in the Co. and turn up at the AGM and start asking embarrancing (sp?) questions about directors pay.
Pity you are not in the UK. Hear any shair holder is allowed to spend 2 hours a day at the Companies HQ looking over the directors renumaration package, take any notes they want, and leave the building with them.
This would give you lots of amo. for the AGM
Wouldn't it be nice if schools got all the money they wanted and the army had to hold jumble sales for guns
BTW, anyone who is earning that kind of wage and still living from paycheck to paycheck is, well, a fscking idiot.
I resent that. Yes, I was an idiot (back in college), racking up a lot of credit card debt. I now find myself paying off all of that, plus a hefty student loan to boot. I do quite well for myself (not $60K, to be sure), but quite frankly, the minimum monthly payments on my outstanding debts swallow just about every penny I take home (well, that which isn't taken by rent, utilities, etc.).
Your advice is definitely sound, and I'm working on building up my rainy-day fund, but it's going to take a while, and meantime, I'm vulnerable.
All I'm trying to say is, some of us are no longer idiots, but still manage to find ourselves in this position.
Yeah, you've hit the nail on the head here, at least in the case of this company. The memo mentioned above is quite obviously trying to get people to quit without acutally having to lay them off and deal with severance pay, lawsuits and unemploymnent benefits:
Accordingly, we are requiring each employee at or above a certain level ($60,000 annual salary) within the Company to take an immediate 3.85% reduction in your annual salary. This reduction will be reflected in the compensation paid to you on the May 31, 2002 and the June 14, 2002 paydays.
If your position falls within the affected levels, we are informing you with this communication that your gross bi-weekly salary to be paid to you on the regular May 31, 2002 and June 14, 2002 paydays, will be reduced by 50%.
Continuing in your employment on or after May 20, 2002, will be deemed acceptance of the above-described pay reduction terms. In the event you do not wish to accept the reduction, you must advise the Human Resources Department immediately. The Company will then take the appropriate action, which may include the elimination of your position or the termination of your employment."
Which reads, pretty much "we are screwing you out of your pay. If you don't like it, then leave."
Now, if their goal was to keep employees despite this unfortunate needs for pay cuts, the second half of the memo would read something like this:
"We sincerely regret the need to have to take this action. As you are well aware, our company is going through a very difficult time financially. We are initiating this action in order to spread the financial burden out across our employees rather than take the more drastic measure of having to eliminate some positions altogether.
Our goal in this action is to increase the profitability of the company and maintain employment for each and every one of our employees. It's going to be a difficult road, but we are confident that with the support of all members of our team, we can get through this difficult time. Once we are in a better financial position, we plan to return everyone's salary to the previous level. Again, thank you for your understanding and support."
This says "we're screwing you out of your pay but we'd really rather not. We know it's a crummy thing to do but it's better than the alternative, and we hope to be able to make it up to you someday."
If I worked here, even if I wasn't being affected by the pay cut, I'd be outraged by the very thinly veiled message being given, namely that they don't care about their employees at all. it would serve them right if they lost most of their employees and then couldn't recruit new ones because people were so outraged at the way people were treated.
Hm, OK, next company on my list of places I would never want to work is now Divine.
The employees of Devine, along with everyone else in the country, are aware that the economy isn't in really gung-ho shape right now. They've also heard about Enron, along with numerous dot-com companies that basically have gone belly-up overnight. They might very well be faced with the possibility of losing their job in a moment's notice.
Yet in spite of all that, those making over $60K a year somehow are unable to save enough to pay HALF the bills for one month? What would happen if they got fired? Is cost of living so horribly expensive in Chicago that 60K might as well be minimum wage?
-Restil
Play with my webcams and lights here
An employee's home life in SOME way -has- to be a manager's concern. Why?
Because if your DBA suddenly loses her husband, and you aren't sympathetic, you lose a DBA.
If your NOC monkey's car goes poof, and he's 10-15 minutes late - then you either have to bitch at him, or fire him, and you lose a NOC Monkey.
No, its not a manager's duty to make sure that an employee's home life is peachy keen, but it IS part of his or her job to remember that serious homelife problems can affect an employee's performance drastically - and cutting them, just to preserve your bottom line will likely result in other employee's jumping ship just because they percieve an unsympathetic management staff.
Yeah, fire the slackers. But giving shit to hard workers who have something happen that isn't their fault is -really- poor management practice.
(Not assuming that's what you do, just commenting that you cannot just look at the bottom line - you have to look at the bigger long-term picture as well as the immediate short term goals)
http://quiz.ravenblack.net/blood.pl?3357354385
My advice is that you should always pay down credit card debt before saving, you'll be better off in the long run. I always pay off my cards in full each month, I never carry a balance. Being in debt means having less. I make exception for home mortgage and car loans.
~C
Your advice is definitely sound, and I'm working on building up my rainy-day fund, but it's going to take a while, and meantime, I'm vulnerable.
All I'm trying to say is, some of us are no longer idiots, but still manage to find ourselves in this position.
Wow. I could not have said that better myself. There are many of us under 30 yrs old that have old credit card debt with student loans that are trying to get that stuff paid off whilst working on a rainy day fund...
I too am doing well, I too was way too stupid with credit cards when I was 18. I am working on getting that debt taken care of so I can save for the future but it freaks me out to think of how vulnerable I am.
Oh, and as for how companies are dealing with the poor economy... my company has not paid us on-time since December. You see, we are on a monthly pay schedule (one big check on the 1st of every month) which requires good budgeting to get through the month okay. Missing that by a few days can be rough, but manageable. However, this does not work too well when you are paid 15 days late, and really sucks when you are paid 30+ days late. I have not been paid for March, and I should be paid for April this week but that is not happening anytime soon. (Ramen noodles ROCK!)
So, I guess I have to start calling lawyers to see if there is any legal action that I can take... anyone happen to have had a similar experience and have advise??
Please, get a grip!
There's a HUGE difference between giving a suddenly widowed employee six months to process the death of her husband, or an employee a few hours to deal with a mechanical failure of their car, and letting stuff slide indefinitely.
I'm not saying that a single mother has 6 months to find a husband and get married, but she needs to find a workable solution. Fast. Management can cut her some slack if her usual daycare provider is sick and can't take care of her kids, but can't let her constantly go home early while her coworkers all work late several times a week because her current daycare provider requires her to pick up the kid early. She needs to either find another daycare provider or another job, or some other solution (e.g., *always* being the first person in the office because she puts in her extra hours in the morning).
The best example I've ever seen of this was a blind sysadmin. He was regularly asked how he would get to work during interviews, and he told the interviewer that that was his concern, not theirs. He asked for no accomodation on that, only modest accomodations (in one-time purchases for things like text-to-speech synthesizers) required to do his actual work.
For every complex problem there is an answer that is clear, simple, and wrong. -- H L Mencken
Tell everyone in the IT to stick together, and you may be able to "convince" the upper management, that going through with this pay cut, at ANY time, would be a "Bad Thing"
PS ... Start getting that resume polished up right now ...
Karma? Karma? I don't need no stinkin' karma.
Interesting, I see the oppisite happening....
Then again it could be my particular neck of the woods so to say.
I do live in Ohio.....
I am certain that the Devil has a hold here of some sort(tounge in cheek, In the movie "Needfull Things" when Ed Harris asked Max Van Sydow(Satan) where he was from ? , Akron...Ohio....(I live here) But when you look at the number of politicians, presidents, actors, sports legends, etc that come from Ohio it seems a little odd.....
Libertarianism is a WONDERFULL thing Imho, I just wish they would change the name, it seems to people who are not familiar with it to alighn your political beliefs to Jimmy Carter or worse Bill Clinton. If in europe say they came up with a new political party , completley pure of intent and benevolent in function and called it say...Nazipuffism, I doubt it would garner much of a following.
I see the same with Libertarianism, my boss jokes he would be a Libertarian if he actually thought they could win anything.....
Sig went tro...aahemmm.....fishing........
People like me^H^H^H that typically found themselves over the past five years or so with more money than they were capable of managing. Consequently, most of us drive nicer cars than we need to, and live in bigger homes than we need to, and have too many DVDs. The half million bucks, gross, I^H^H they've earned over the past few years is gone, gone, gone.
Oh GAWD! Take some responsibility? "More money than they were capable of managing?" Give me a break. You were perfectly capable of managing your money. If you are smart enough to hold down a job, you are smart enough to do the addition and subtraction necessary to save more than you spend.
You didn't WANT to manage your money. You were perfectly capable.
That doesn't mean we^H^H^H they're idiots. Just that they're still figuring this whole "money" thing out. In a situation like that, it's harder than you'd think to save for a rainy day.
Sorry, it does mean you are an idiot. It is not hard to figure out the "money" thing. If you are ignorant of specifics (different types of investments and so on) there are plenty of books on the subject, and you can even hire people to help you manage your money. You were perfectly capable, and it wasn't that hard. You just didn't WANT to.
God is real unless declared integer
Yes, if the company were shut down, it would be very bad both for the company and the employees. But the threat of shutting the company down could prevent things like what this company did in the first place.
Never take moderation advice from sigs, including this one.
I don't know, I read the memo about how much the investors like to see cash on the books anbd so forth and so on. But my BS detector just kept on going ping ping ping.
IMHO, if they are not paying you at all in late May/ early June, then the reason is that they are doing so is in fear of not making payroll. Some management wonk probably figured it was better to make up this 5% dealey than to actually miss payroll.
Their is a slippery slope that a company gets into once financial misery sets in.
Do:
Good people leave,
customers get skittish,
lendors freak.
Loop.
My advice: start looking now. The company is flashing big orange DANGER warning signals, and passsing out a memo saying to ignore them, they're just for some silly regulation.
good luck
--Pete
www.avacal.com -- the home page of pete shaw
"divine helps companies maximize profits through better collaboration, interaction, and knowledge sharing across their entire value chain."
OK, let me guess...
- The top management are all book-trained MBAs. They built the business on venture capital with handshake deals where who you know is much more important than what you can do.
- They are regularly written up in glowing articles in all the local business PR rags.
- They are in technology, but they have a VP of communications and/or marketing who previously did not work in technology, and who mocks it openly.
- Middle management is encouraged to think about their political standing within the company, and routinely value that over actually getting actual productive work done.
- The sales force dresses in Armani or similar, and drives late-model cars more expensive than $40K because it is supposed to give them an advantage.
- People who don't show up for happy hour are considered ineligible for promotion, despite the fact that behind their backs everyone hates everyone else and doesn't want to drink with them.
- No management has ever showed up at a goodbye luncheon, or if they did, they spent five minutes there and didn't speak to the outgoing employee.
- HR is the second-most powerful unit in the company (behind marketing) and establishes policies with the help of corporate lawyers.
- Golf is considered essential to one's career.
divine employees or ex-employees, how'd I do?No, you're the one who's trolling.
Unions do not serve to protect weaker workers at the expense of the hotshots. Read your fscking Adam Smith (you know, the father of the Free Market) to see what his opinion on unions is.
Frankly, the imbalance in bargaining power between employer and employee is such that the only way the workers can get a reasonable wage and decent working conditions is by collective bargaining. This is historical proven fact, and the reason unions exist in the first place.
If an employer can't pay union scale without going out of business, that means that he is not profitable enough to pay his employees a decent wage. According to the Free Market doctrine, he shouldn't be in business, but he should go broke. Nobody's obliged to support a bad business model, and especially not by taking lower wages and worse conditions.
Remember, the Free Market cuts both ways. Read up on some history and economics before you make a fool of yourself in public again.
Mart"I know I will be modded down for this": where's the option '-1, Asking for it'?
Nope, not quite true. If you are having money trouble, the *last* thing to pay off is the credit card company. Credit cards are unsecured loans, which means the most they can do is call and harass you and mark your credit. First thing you do is eat. Second thing you do is pay your house ( a secured loan --you don't pay, they take your house ), third thing is pay your car loan ( how else are you going to get to work ). Then, and only then, pay your credit cards. Call the credit card company and tell them you are having a hard time, and please stop calling. They will stop calling, and may lower your rates if you make minimum payments.
This is not the situation I'd encourage anyone to get into, but if you are desperate, this is what you can do to protect yourself and your livelyhood.
On the next technology boom, don't put yourself in this horrible, stressful, humiliating position of needing to choose "Who should I pay next?" when the bubble breaks.
Don't come off saying "the 18% credit card interest will cost you more in the long run". Paying the credit card company last is for people who would go hungry and homeless before they miss a credit card bill. Put your priorities into perspective.
Exactly. While the above is certainly not a good excuse, it's probably by far the most common reason people get into trouble financially. I'm definitely in that group.
The one thing I really wish I'd done differently was to learn more about personal finance, and more importantly, the consequences of poor financial management. I can't blame my parents - they always bugged me to save, don't spend so much, be smart, etc. I didn't listen when I was growing up, and because I had no real responsibility then, I saw no negative consequences. I spent my allowance like there was no tomorrow and enjoyed my youth.
I got out of college 6 years ago and landed a good job making nearly $40k. All of a sudden I had a hefty, steady income with lots to spare after splitting living expenses with a couple of roommates. I bought an expensive vehicle, a few nice guitars and music studio equipment, computer toys, went out to eat a lot, etc. My mentality at the time was basically that I was young, it was early in my life, and I'd have plenty of time to save later on. Plus, in 5 or 6 years I'd be making a lot more money and would have no trouble paying everything off. I never thought about saving for retirement, to buy a house, having a cushion for hard times, etc.
I suppose I've been lucky. I haven't gotten laid off or anything, so I've got it pretty good compared to many. But 6 years later my salary is almost exactly double what I started with, and I'm just now climbing out of credit card debt. I live in a small one bedroom apartment with two other people, drive the same vehicle and have no cushion. About 8 months ago I moved in here to save money and aggressively pay off my debt. I've managed to knock off about $12k, with another $4k to go. I'd be done by now if I didn't have a wedding in another month, but it'll be a couple months after that before I'm down to $0. Then we start saving for a cushion and a down payment on a house. We'll probably buy our first house in mid to late '03 depending on how things go.
About a year ago, I realized that if I had been just a little smarter with my money, I could already own that house. Not only that, but I could probably still own all the toys and gadgets I've bought, I just would have had to wait until I could afford them instead of buying them when I couldn't. A $3000 guitar is a much bigger deal when you make $40k than it is when you make $80k.
Back to the point... I really wish my high school or college had had a good course on personal finance. If I had really learned that being irresponsible early would have me paying for it years later, maybe I would have acted differently. Instead I just "winged it," as you say, and assumed everything would work out automatically. I figured I was ok as long as I always made at least the minimum payments on all my debts.
Stupid, but after reading this thread I'm glad to see I'm not alone. ;-)
Say hello to zMac.
What he was saying was to pay off credit card debt, THEN save, not that you should pay credit card debt to the exclusion or detriment of your other bills. That's two very different situations. Saving simply will give you (in almost all cases) a lower return than 12-15-18-21-24% savings you see if not having to pay credit card interest. However, this does not mean that your advice regarding priorities of which bills to pay wasn't good.