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Salary Reductions
Benefits & Compensation
Salary Reductions
Exchange ideas about health plans, retirement, work/life benefits, and employee assistance.
In these tough time we are thinking about doing a pay reduction company wide. What is the best approach, a flat % across all or can you segment it by salary bands or even job funtion?
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Forums » Topic Forums » Benefits & Compensation » Salary Reductions
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Salary Reductions
posted at 12/4/2008 8:37 AM EST
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
It is much easier to communicate if it is a flat percentage. That said, many times different groups can handle different percentages...often the lowest paid can't handle even the lowest percentage. And it may or may not surprise you as to some of the higher paids not being able to handle one.
If you choose something other than a flat percentage, then you get into the "who is worth more?" issue. Current salaries SHOULD ALREADY be there....so a flat percent should still have everyone correct in the pecking order. Have you considered other cuts? Like say, employer match or other programs/benefits that wouldn't have as large an impact? Unfortunately we had to cut both pay and benefits this year. And no, we didn't use a flat percentage, although I wish we would have since I got to be the one explaining to each individual employee how their pay and benefits were being cut. Not a fun position at all. It would have been much easier to have a company wide meeting to announce all the changes. Our percentages ranged from 0% to up to 50%..... |
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Salary Reductions
posted at 2/11/2009 9:12 AM EST
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Posts: 42
First: 3/13/2007 Last: 6/8/2010 |
Many employers are creatively cutting costs to avoid reducing workforce and lowering pay. A recent survey by Challenger, Gray & Christmas reveals that many organizations are reducing travel expenses, cutting worker hours, elimination of bonuses, and reducing various perks.
In dire situations, reducing pay across the board is a viable strategy. Although it will be unpopular, people may be happy to simply keep their job. Communicate that such measures will help the company retain the current workforce. If workers understand that pay reductions will help them and their co-worker keep their jobs, it may be less painful to accept. Keep in mind that pay cutting measures may result in loss of top-performers. You should be prepared for that. Are you - as in: what will it cost your organization with the loss of top performers? |
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Salary Reductions
posted at 2/12/2009 7:07 AM EST
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
Ours were variable, but as far as I know, only the people who made the decision know the "formula". Many of our lowest earners took no pay cut at all. The highest cuts (and largest percentages) were from the top earners.
The only things that weren't variable were benefits and 401k match. Those were cut across the line for all employees. |
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Salary Reductions
posted at 3/25/2009 9:10 AM EDT
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Posts: 1
First: 3/25/2009 Last: 3/25/2009 |
If cuts are necessary in the future, I am strongly recommending a reduction in work hours to a level that would not reduce any insurance benefits (minimum is 30 hrs). A reduction of one 8 hour day would also allow an Employee to seek a one-day-a-week part-time opportunity. |
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Salary Reductions
posted at 3/25/2009 10:30 AM EDT
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Posts: 1
First: 3/25/2009 Last: 3/25/2009 |
I've heard of some privately owned companies here in Canada reducing the work week from 5 to 4 days. I hear that the employee can then claim government provided unemployment insurance for the 5th day. People typically can't look for a part-time job that only provides 8 hours of employment for the 5th day. So people wind up having to hold down a second part-time job evenings and weekends to fill the void. |
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Salary Reductions
posted at 3/25/2009 11:04 AM EDT
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Posts: 32
First: 7/29/2003 Last: 7/22/2010 |
I would recommend a flat percentage, for the reasons shown. The announcement should be made by the president, who should show leadership by saying (figures to be chosen) "Everyone but me will have a salary reduction of 10%. I'm reducing mine by 20%." The 10% should be reduced only in the case it would lower someone below minimum wage illegally. |
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Salary Reductions
posted at 4/5/2009 12:40 PM EDT
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Posts: 1
First: 4/5/2009 Last: 4/5/2009 |
This question is from the employee side: What are the ripple effects of, say, 10% pay cuts, on various benefits? Life insurance is based on salary, as is the disability insurance formula, and one's 401k contribution goes down along with one's salary, of course...are companies addressing this? |
Forums » Topic Forums » Benefits & Compensation » Salary Reductions
