In the September 20, 2016 Ask The Headhunter Newsletter, a reader doesn’t see a pay cut as a good deal.
Yesterday my company, which is experiencing cash flow difficulties, asked me to take a 30% salary cut to keep doing the same job and still at full time. Do you have any tips on how to respond? I feel like I’ve been bushwhacked.
The obvious answer is to tell them to shove it and quit.
But if that were your first choice, you wouldn’t be asking for tips. There are several ways you could respond, so let’s consider some of the issues before I offer some suggestions you could tweak to suit your needs.
Let me ask a key question:
Did they give you any indication or evidence that they expect to return your salary to normal again? When?
If they’ve communicated nothing about that, it’s a bad sign. If they’ve made promises, ask for it in writing. How they respond will tell you all you need to know about the company’s viability. Good management is honest with employees and makes and keeps commitments. A company that leaves you in the dark about what’s really happening is in more trouble than it seems. Don’t ignore signals about this.
You need to decide how much you need that cash flow yourself. That will dictate what you should do next: wait it out or move on immediately?
Is there anything you can say or do that would bring your salary back up?
In other words, if you decline the cut, would they keep you on at your regular salary? I doubt it. So the choice is, do you accept the new terms while you look for a better job (without disclosing that’s what you’re doing), or do you quit and focus all your time on a new job?
Only you can answer that.
Negotiate a pay cut
This might work if your employer is likely to recover financially: Ask if they’d leave your salary at 100% on the books, pay you 30% less, and issue a promissory note for the balance. That is, an IOU. Then you might have standing to collect when they go bankrupt and a judge has to decide whose debts get paid first by the court.
Or, play tit for tat: Take the pay cut if they’ll take a work cut. Offer to work 30% fewer hours. Always be aware that opening a negotiation can result in the other guy withdrawing the deal entirely. That is, they might just tell you to leave now. But you could just leave now, too.
Fall back on this
Now I’ll give you my second best advice. Talk with a good employment attorney before you answer about the 30% cut. I know an attorney will cost you a few bucks, but consider how much that pay cut will cost you over the next one or two months. An hour with an attorney will probably seem like a good investment if your goal is to work out terms.
If you’re pretty sure the pay cut will turn into a layoff, start preparing now. Here are a few other issues to consider, from my PDF book, Parting Company: How to leave your job:
Should you volunteer to get laid off?
You might be able to get a severance package that costs the company even less than keeping you on at a 30% pay cut — if you volunteer to leave. (See pp. 26-27.)
Should you tell your boss you’re leaving?
Are you going to start a job search? Your boss probably wouldn’t be surprised — but I advise you not to disclose what you’re doing. If you’re going to rely on whatever meager salary they’re going to keep paying you, don’t risk it by appearing disloyal because you’re looking for a new job. (See pp. 38-39.)
Stand up to downsizing
Are you pretty certain the company is going to fire you soon? From the book:
“Be smart. If you’re caught in a downsizing, don’t let yourself be pulled under by the current of panic. Everyone grabs the same life preservers: the job postings, the resumes, the cover letters and the random interviews. By that point, the channels of the employment system are clogged with so much competition that surviving the trip is debilitating, if not impossible.” (See pp. 23-25.)
In other words, don’t be the last one out the door pursuing the same jobs as your laid off co-workers!
Prepare and plan for the worst. When employers ask their employees for money — make no mistake, that’s exactly what this is — it’s a bad sign.
The only thing that would make me feel better is if your employer puts some skin in the game, too, in one of the ways I suggest above. But here’s my best advice: Immediately start a job search and get ready to move on — but be careful. (See How your old boss can cost you a new job.)
I wish you the best with this, but I doubt it’s going to work out well.
Did you ever take a pay cut to keep your job? How did it turn out? What would you advise this reader to do?