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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.
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........
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)
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)
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.
Ummmmm, just because 60k is well above the cost of living, doesn't mean that loosing half your pay is a trivial thing. Gnereally speaking, as your income grows, so do your expenses. Few people put everything away over the bare necessities. Many people don't put anything away, even when they make a good deal of money. However, even if you DO put money away, if you invest it well it's not something that you want to just grab.
Take my parents for example, combined they make well over $100,000. They certianly doin't live paycheck to paycheck and they invest quite a bit. However it would be a hardship if 50% of their pay evaporated for a month. There are bills to be paid and I'm betting they do total half or more of their total income. So if half of it dissappeared, they'd need to tap into savings.
Well contrary to what you might think smart people do NOT save money by hiding it under a matress or even leaving it in a bank. A good deal of it is in non-liquid assets like land, their house, etc. This cannot just be easily liquidated. Even at a large loss it would be problematic to liquidate it in a couple weeks. The most luquid asset they really invest in is stocks. However even those aren't something you want to liquidate unless it's absolutly necessary. In addition to paying captial gains (on those that are up) you then loose the potential growth.
Long term investments aren't something you just want to gte rid of, it costs you far more than just the actual money you get from it. As for getting fired, generally when you have a job of that level you have a contract that gaurentees you a severence pay of at least a monet, often more. Gives you time to get a new job, and so on.
Basically ti's jsut a really dick move on the part of their company. A paycut is one thing, people don't like them but in a slow economy a 4% paycut is probably something employees making that much wouldn't really get all that mad about. The problem here is that first, it's being applied retroactive to the beginning of the year. They aren't just cutting your pay, they are cutting what they already paid you for the first 6 months by 4%. Second, it's the huge hit that the employees ahve to take over the short term. Like I said, it really causes problems, even if you have saved up.
Also this is something that will make people additonally angry because there's no reason for it. If the problem truly was jsut a slower economy and profits going down, a standard pay cut would do the trick just fine. The onyl reason for a quickm drastic cut like this is to attempt to artificially inflate earnigs this quarter. And then there is the fact that the management is NOT taking a paycut and, indeed giving themselves large bonuses.
It makes people rather angry when they are forced to endure hardship because the morons up top refuse to take any responsibliity. SOmething tells me that had the management just not given themselves bonuses, it would have more than made up the total amount the company will gain in this pay cut.
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.
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.