Four Types of Pay Cuts
Recession. Slowdown. Correction. Whatever you want to call it, when the economy is suffering, the effects of this are far-reaching and impact almost every job sector. Layoffs abound as do hiring freezes and pay cuts.
Read on to learn more about how pay cuts may vary, and how they could affect you.
1. Pay Cuts
Pay cuts are something companies are very cautious about doing, but they're not off the table, especially during a recession or other extreme situation where a company is under pressure.
If your boss does come to you and presents a pay cut, there may not be much you can do about it. It usually isn't presented as, "This is what we're doing, and we need your approval." It's just "This is what's happening."
Your employer, like many companies, may cease contributing to your 401k or other retirement plan. Some of the soft benefits, like maybe less tuition reimbursement, is also common. Don't be shocked if your monthly contributions for medical benefits rise as well. Expect, also, to be asked to do more with less.
Depending on the type of business, travel can be the next biggest expense for many companies. Your boss may ask you to rely more heavily on video conferencing and phone calls. And, naturally, you can bid adieu to Friday bagels and coffee on the company's dime.
3. Bonuses and Raises
During tough financial times, bonuses and raises are often put on ice. If you're used to a base salary and a bonus tied to performance, remember that a bonus is discretionary and the first place a company would look to cut.
If you don't receive your bonus, you may want to start to look for a new employer. If companies don't pay bonuses they had committed to, their credibility is ruined. Other salary increases like merit raises and cost-of-living raises can also be held to a minimum to save the company money.
4. Reduced Hours and Mandatory Furloughs
We've seen it before where government employees have been asked (or forced) to work fewer hours or take unpaid vacations. And when the Covid-19 pandemic hit, we saw many companies put employees on furlough until conditions improved. You may not have a choice about doing this, but time off is the one benefit you have. Take a breather—or take the opportunity to pursue other work on the side.
Check with your employer to be sure you're able to take on additional projects outside of work. You might even want to get it in writing that it's OK to pursue such work.
What You Can Do:
- Be proactive. Look for ways to help your employer cut back without cutting jobs or pay.
- Speak with an accountant to see how you can maximize the benefits and paycheck you have, perhaps by increasing your contributions to "cafeteria" plans or raising deductibles.
- Try to adjust your reduced hours so they suit you better.
- Consider working for a smaller company. You may experience more transparency and have ample warning if things are going south.
- Use mandatory time off to look for another job.
- Don't live off your bonus.
- Trust your instincts.
Get Help with Your Job Search
A pay cut not only hits you in the wallet, it also hits you in the gut. You work hard and deserve to be compensated. Want some help finding a better, more stable job? Create a free profile on Monster today. We can connect you to recruiters in your industry, send you custom job alerts, and much more.