TAKING A SALARY CUT
By Dimitri A.C. Ly
Your boss calls you into his or her office and asks you whether you'd consider taking a salary cut in order to keep your job. Surprised? You shouldn't be. As the worldwide recession deepens, more and more companies are adopting this strategy in an effort to reduce labor costs while avoiding major layoffs. Whether you, as an employee, should accept the offer depends on your specific needs, both in terms of your career and personal finances. There's no cut-and-dried formula, but some concerns are universal. Here are three pros and three cons to keep in mind as you decide whether taking a salary cut is the right option for you.
Pro: You get to keep your job.
The most obvious advantage to taking a salary cut is that it allows you to remain gainfully employed. A 10% wage reduction is still better than not getting paid at all, especially if the work makes you happy. That's why you shouldn't base your decision on money alone. No matter what industry you're in, there's something to be said about job security. Besides, in the current market, your chances of snagging a better elsewhere are relatively slim. In fact, it's more likely you'd end up in the unemployment line.
Pro: The company will owe you.
Taking a salary cut is a great way for you to show loyalty and commitment to the company. By accepting the offer, you'd be doing your bosses a considerable favor, which may pay off when the economy picks up again. If you doubt your employer's long-term gratitude, you can also cash in immediately by requesting modest adjustments to your daily responsibilities. For example, if you want an earlier shift so you can pick up the kids after school, now is the time to ask.
Pro: You're helping your colleagues stay employed.
Balancing your needs with those of the people around you is never easy, but it's important in the current economic climate that you take into account the way your decisions affect others. Consider, for instance, how many jobs could have been saved with the $165 million AIG recently spent o contractual bonuses. By taking a salary cut, you're making it easier for your employer to keep your friends and colleagues on the payroll. That wasn't a priority for AIG executives, but perhaps it should have been.
Con: The offer may not match your financial needs.
Wage reduction directly affects your ability to provide for yourself and your loved ones. That's why it's crucial you review your budget carefully before taking a salary cut. Given the option, you should also look over the company's severance package. That way, if the new remuneration fails to meet your financial requirements, you can decide whether to quit right away and take the payout or accept the salary cut as a temporary situation while you look for another job.
Con: It decreases your professional standing.
One thing you should always take into account before making an important decision such as taking a salary cut is how it will affect your long-term career plans. A pay reduction is technically considered a demotion, which means your professional worth may suffer from it, especially in the short term. Keep in mind, however, that everyone's feeling the crunch right now, so you should have no difficulty explaining this momentary setback to future employers. In fact, they may look at it favorably, since it displays loyalty to your colleagues and employer.
Con: You may never reach the same pay grade again.
Because your previous pay grade is often a factor when negotiating a promotion or job offer, you may feel the sting of a diminished remuneration for some time. As such, you need to consider how taking a salary cut would affect your long-term plans, especially if your reduced pay is considerably lower than the current industry standard. Also, keep in mind that such requests are a last resort for most employers, so it may take some time for your company to get back on its feet.
beyond the cut
Whether or not you decide taking a salary cut is right for you, it's important you behave with integrity. Don't let your reduced pay affect the quality of your work or make you bitter. Otherwise, you'd be wasting all the goodwill you garnered when you accepted the offer. By the same token, if you choose to quit your job instead, make sure not to burn any bridges. Leaving a company for a higher remuneration is perfectly understandable; doing so in a disrespectful manner is not. Remember that your professional reputation is more important than any salary.
