Well,, it looks like I got out of my previous company just in time. First there was a round of layoffs, now the employees are facing a 47% pay cut for the remainder of Q1 and a subsequent 20% pay cut for all of Q2.
From The Chicago Tribune:
The company, which supplies office products to such retailers as Office Depot Inc., told its U.S. employees Monday that it would impose a 47 percent pay cut for six weeks, beginning Feb. 23.
After that, some of the pay reduction will be reinstated, with employees seeing their paychecks trimmed by 20 percent at least through the end of June.
“It’s an alternative to permanent reductions in force,” company spokesman Rich Nelson said. “It allows people to stay employed, but we realize it imposes some hardships as well…
For Acco, which trimmed its global workforce by 500 positions through layoffs and attrition last year, the draconian pay cut is “a matter of making sure we meet our plan for the first quarter of 2009,” said Nelson.
To ease the pain, Acco executives told employees it would provide short-term financial assistance to employees put in the “most extreme circumstances” by allowing them to borrow from future earnings. The salary cut will affect about 2,000 U.S. employees, including 750 who work in the Chicago area, the chief executive among them..”
It’s a double edged sword. Yes, employees get to keep their jobs but at what cost?
Losing close to 50% of one’s pay can put an employee in fairly dire straits, even if loans are available. As long as the terms for repayment are fair and take the employee into account, then it may be a short term solution for those in serious trouble. But if the company enforces strict deadlines and/or repayment schedules, then it may just be prolonging the agony. Unfortunately, I do know more about this situation than I feel comfortable sharing. Let’s just say that I think the latter will be more true than the former.
Is it really better for employees to keep their jobs under these circumstances? Wouldn’t it perhaps be better to “get the misery out the door?” per Truman Bewley, Yale Economics Professor? Will people quit and collect unemployment? Will they suck it up and see it through? Will they take the advice of others?
I don’t know the answer here. Though I’ve been on just about every side of the employment equation, I’ve never been in a situation where I’ve been asked to work for half my wages. Nor have I ever asked this of any employee.
Yet, this pay cut situation is becoming more and more common. Again, from the Chicago Tribune:
In December, FedEx Corp. said it would cut the salaries of 36,000 workers by 5 percent. Last month, Advanced Micro Devices Inc. said salary cuts of varying percentages would be made throughout the company. And last week, General Motors Corp. said it would cut U.S. salaried workers’ paychecks by up to 10 percent.
A Watson Wyatt survey of 117 companies across a broad range of industries in December found that 19 percent planned to institute salary freezes during the next 12 months.
When that same question was asked in October, it was 12 percent. Salary reductions were planned by 6 percent of companies surveyed in December, as opposed to 4 percent in the October survey.
Bremen believes the salary-cut trend is on the rise and will be considered more quickly during the next downturn.
I can’t even bear to think about “the next downturn”. This turn is down enough.