10 Responses for "Pay cuts vs. Layoffs"

1. Miss M January 30th, 2009 at 1:00 pm 1

   Fortunately I’ve never been forced to make a decision like that. I think it depends on your industry and how difficult it would be for the people getting laid off to find a new job. If work is scarce I’d definitely choose the pay cut, I could be the person out on the street.

   The lady offering to reduce her salary, definitely sad. I’d be worried she will still get laid off in a month regardless, and the paycut would be for nothing.

2. jin6655321 January 30th, 2009 at 1:36 pm 2

   Out of curiosity, which, do you think, is the better option for the second lady?

   1) On one hand, taking a pay cut will save her job, but it’ll make saving harder- or impossible, if she’s asking for the bare minimum. Would it be better to keep her current pay but cut back drastically on her spending to start/boost an emergency fund? Esp. since there’s a chance that she’ll be laid off anyway, if not soon then later?

   2) By most people’s optimistic forecast, the economy should start recovering in 6 months to a year or two. So, let’s say, she took a 20% pay cut, now, unless her employer is very fair, chances are, she’s not going to get a 20% “Hey, the economy doesn’t suck anymore!” raise, you know?

   3) Then again, regardless how frugal you are, you need some measure of financial security, even if it’s short termed, especially if you have a family to provide for. Securing your job for a few months, or a year, at a lower pay might be better, and less stressful, than living in constant fear of a layoff.

   Honestly, I’m not sure what I would do in that situation.

3. Ashley January 30th, 2009 at 2:23 pm 3

   Thanks for your comments.

   I don’t know which is better. I have to think right now that it’s better to keep your job even with a pay cut. The 3% pay cut isn’t a huge deal. Since she works at a school I’m thinking it would be tough to get a job right now. All the schools have had their funding cut, so I highly doubt anyone is going to be hiring… they are all looking to cut.

   The second lady… I don’t know the details of her situation but lets say there are 5 people in her department and they are going to keep two. Maybe offering a pay cut would ensure you one of those positions. In that case it might be worth it. She seems pretty savvy so I’m going to assume she has some kind of e-fund. But I have no idea.

   Either way, a pay cut isn’t easily made up. A 3% cut isn’t made up with a 3% raise. (If you make $100 and you take a 3% cut you are now making $97. But a 3% raise won’t bring you bake to $100, it only brings you back to $99.91.)

   It’s a hard choice to make, but I would lean towards keeping your job.

4. Craig January 30th, 2009 at 4:06 pm 4

   I would vote for the layoffs. Pay cuts sound good in theory, but they would be bad for the company. If you are an employee and got a pay cut, you would have the same responsibilities if not more and for less costs. Workers productivity would most likely decrease, and it could always lead to more pay cuts in the future. It’s better to show your value and have layoffs.

5. Michael Weber January 30th, 2009 at 4:36 pm 5

   I find the first example a horrible example of employers putting it on the employees. There’s no excuse for a company to put their financial difficulties on their employees by offering those types of choices. I’m afraid that some companies (or charter schools) are using the recession as an excuse to cut pay and shed jobs.

   I personally believe that if you take a pay cut, you’re hurting yourself for the next few years. If you take the cut, then your next raise will be back to where you were before and it could take up to 2 years to get back on track.

6. Kacie January 30th, 2009 at 6:15 pm 6

   Wow, that’s rough. Maybe the lady who’s willing to take a pay cut really needs her company’s health insurance. That would be one reason to do that.

7. SlaveToMyLenders January 31st, 2009 at 3:56 pm 7

   Hmmm, 3%? Well, both my husband and I (who work for employers in completely different industries) were told on Friday that we’ll be notified next week if we’ll be going onto a 4 day work week — i.e., a 20% reduction in gross pay. I wouldn’t even flinch about 3%. I spent a lot of time working out how we can manage, and think we can pull it off.

8. LAL February 3rd, 2009 at 12:14 pm 8

   I’d take the paycut but start looking immediately for a new job.

   My DH was told no raises this year, excepting promotions which are not being given out. They will get a bonus to make up for no raise, but that’s to try to keep costs low.

   So next year we “might” get the raise we should have gotten this year.

9. David Weaver February 18th, 2009 at 2:39 pm 9

   I would rather take a smaller salary and have everyone kept on than seeing a few people be totally eliminated.

   The trouble with recent decades has been that no one is asked to sacrifice a little personally for the greater good of all. And those who have alot seem to resent those who have little, condemning them as “lazy” or “lacking ambition.” But most people who are struggling to get by today are working - they’re the working poor. And increasingly, they are the working middle-class: the people who have been the backbone of the country since the end of World War 2.

   Perhaps for those who have too much we should come up with a new national slogan to reflect their attitude to those who are below them: “I got mine - too friggin’ bad for you.”

10. Greg / Wise Bread February 27th, 2009 at 4:27 pm 10

    If surveyed, I think most employees would vote for the pay cut instead of seeing coworkers (or themselves) get laid off. But I think that’s just the polite opinion being aired. My guess is that most people secretly think their companies should lose 5-10% of the least productive employees, and let everyone else keep their full salaries. I think management probably feels this way too — the bad economy is good cover for them to let go of employees they’ve wanted to fire for a while (and there’s always a few people who fit that bill in every company).