The thing about useful stuff is: Less pay or no job! What you should do.

Less pay or no job! What you should do. Thursday, January 22, 2009

Increasing numbers of firms are asking their employees to make a choice - take a pay cut or lose your job. Unpalatable as both options are, in the current climate with few job vacancies available as a report here highlights, it is understandable that most employees choose the former.

What's notable about this sort of offer is that they are not

a request to defer an element of pay in an effort to conserve company cash, but which maintains your current entitlements
a temporary reduction with a guarantee to revert to former levels when there is an upturn

As such, these measures represent permanent pay restructures, with knock-on effects for many years to come, including any future pay-rises being linked to a lower base and reducing pensions for final salary pension workers. Similarly, anyone who has moved jobs will have probably experience the situation whereby a prospective employer wants to know what you are currently earning, primarily to avoid "overpaying" you. Hence your revised salary baseline will persist for longer than you may anticipate.

Whilst not suggesting losing your job is a better options [unless you have another job to go to], if you do have any scope to discuss the terms then you may want to propose foregoing any benefits that form part of your compensation package as the first element of any cut instead e.g. car allowance or health care. These tend to be ignored for pension purposes and are often less significant in negotiations with subsequent employers.

As a minimum, you could suggest rephrasing the terms of the cut such that you will agree to "donate" a proportion of your salary to the company during these turbulent times but that your contractual salary remains unaltered. This enshrines an acknowledgement that the cut is temporary in nature. You may be unsuccessful but "don't ask, don't get."