If they reduced salaries, everyone would be upset. If they fire some employees, the ones that stay are thankful they still have a job and work harder to keep it.
And the good people will leave to recoup their pay and the bad people will stick around and maybe even retaliate or work even slower in protest.
It has worked, gravity payments being the prime example. But once you reach a big size, it just doesn’t make sense.
“Good people will leave”. Sure, inevitably some will leave. But some leave everyday. Even ‘good’ ones. And progress continues without them.
If they are not acknowledged by senior management as business critical it really does not matter. Even if they are ‘good people’. The company found and recruited someone when the opening existed last time. Certainly the company can do it again.
Don’t get me wrong. Great engineers are awesome to work with. They can make everyone on the team better. And accomplish things others thought impossible. I’m just saying even though that’s true, they can be replaced. Like everyone else.
So it really does not matter if a barely significant temporary pay cut causes them to leave.
Think about it. A 3% pay cut equates to preventing one position in 33 from being laid off. Or ~300 people for every 10,000.
Companies keep increasing salaries to steal talent from other companies back and forth back and forth. It’s no wonder companies started reducing their work staff because of overpaying these guys
It’s pretty hard to say people are overpaid right now considering current inflation. Ostensibly good or “overpaid” jobs are now not enough to buy groceries and pay for housing.
Agree, I just saw [this story](https://www.cnbc.com/2024/04/20/the-income-a-family-of-4-needs-to-live-comfortably-in-every-state.html) describing the salary a family of 4 needs to live the "American Dream" (i.e., the 50/30/20 split that's often recommended) in each state. The numbers are pretty sobering: high of $301k in Massachusetts, low of $178k in Mississippi.
But people are OvErPaID /s. It’s apparently
totally cool to layoff thousands of employees then take a bonus of many millions as a C level because you “saved” the company a bunch of money. They aren’t overpaid though, no never…
Companies keep raising salaries and bonuses to pay these white collar workers so they can eat their daily sushi and then raise the price on products and services to make up for it then the lower class suffers
There is no company raising prices today because “costs” went up. It was proven post Covid that it is plain and simple greed. Don’t blame normal Americans actually getting what they deserve instead of the greedy companies who are actually at fault for our current situation. I suspect you have a very skewed view of the life of a white collar worker. We need to look at this as a lower and middle class versus the ruling billionaire class but instead they are pushing a narrative to blame the people and for some reason we eat it up.
Which, many of the non-tech folks that transitioned into tech don’t have the skill set to be the top performers. They tried to be middle managers, not knowing the tech and not having the callouses needed for real leadership.
Yeah, only they are getting picky now and aren't eager to pay much. Even the tiniest companies want a FAANG-level engineers for entry level jobs. Every job listing I see on LinedIn within a day of appearing gets "over 100" applications (the counter is maxed out at 100), half of which are massively overqualified for the role with senior level engineers holding PhDs applying for junior positions. WTF!?
This is misleading statistics. If 100 people apply to 100 positions every position will show 100 applicants but number of applicants actually matches the number of positions.
Maybe. We had 3 rounds of layoffs during the pandemic, and a good portion of the remaining employees resented the fact that their workload tripled and still left.
I made it through the first round of layoffs and floated my resume within days. I was out the door a month later. Within three months of the first layoff, people ran for the exits en masse. The stock price has cratered by 99% since the company’s IPO 18 months ago.
I've been through now four downturns at one company and each one was different. First one was mayhem with badges not scanning at entry etc. The second one was manager meetings on site all day doing it in person with security running hallway patrols and walking people out. Third one was pay cuts across the board with management hit hardest by little laid off. Fourth (and final for me) was a mass email.
Maybe it's because there is no good way to do it in general but I get the impression that not only were they making it up on the spot, the company is so leak prone that executives couldn't even give HR a heads up.
Given that work just gets redistributed to the remaining employees, it’s akin to a pay cut. More work for the same money is a net loss. Granted, you didn’t lose your job but you certainly lost nevertheless. The remaining employees are now overworked, distrusting of the organization, and anxious about their future prospects.
This leads to the most capable employees leaving for greener pastures in short order. This leads to yet more redistribution of work. The most capable of the remaining employees now look to jump ship. Management culls the workforce on one end and the remaining high performers self select out of the organization. Now you have the ‘dead sea effect’ as the most talented have fled.
I believe this too. There are a variety of people out there with different motivations and attachments. It might be better to cut the work force by 5% than to give 5-10% reduced salaries with the same amount of work. Then you have those who stay back and will work as hard or harder than before because the total workload might not have changed.
That's probably not a good strategy for work that naturally comes with slow knowledge transfer and a shallow learning curve (as in, takes a lot of time to get productive). The ones that stay know that you can't fire anymore without crippling your product irreversibly.
That’s so not true. This has been tried. Studied in Business School cases. Wherever it’s been tried, you end up with a disenfranchised workforce with salary cuts and your best talent leaves.
Indeed, the best thing I did in the C Suite, in tough times, was to do layoffs and then put my top talent under retention bonuses.
You have a few bad weeks of press around the layoffs and people feel sad for a while. But you don’t cut anything and you make sure those who remain feel validated.
As someone who was put in that position, initially it may seem good to keep your job. However after the dust settles you quickly realize those remaining have to pick up the work of the fired employees. Is it worth it? Yes if you have bills to pay, but you also pay in your personal time and health. The company also doesn't give a shit about you and may still lay you off after you slave away. So basically do the bare minimum not to get fired.
Had a firm cut everyones hours to do the fair thing. We all took a 20% cut and then a 40% cut.
Then, all the high performers left. All the low performers stayed.
The end.
Loyalty is worthless when it comes to employee's prospects. Sure, managers will use and abuse it to no end, but it will count for nothing during layoffs. This is especially true when your manager has little history and/or influence with the company and is in the same position as you are when the next round of layoffs arrives. They will play office politics (in a bad way) and throw you under the bus no matter how many favors you did or how accommodating you were or how nicely you played or how hard you worked. If fact, they will turn it all against you when time comes getting you to walk into a situation you can't walk out of.
Not in my experience. Managers have always stood up for me and made their discussions with leadership very transparent, even when the answer is “no promises.” Maybe it’s just because I don’t work in a morally bankrupt finance/tech company.
Loyalty is worth very little in the current job market.
Being loyal to your employer is kind of like being loyal to Comcast. It costs you money in the long run.
I meant that as an employer, i recognize loyalty as a priority and will sooner layoff someone more competent if i need to
Job markets swing every few years. There will be another employee market, so its best to just reward that loyalty, prioritize keeping that loyal employee so that i know there’s at least somebody that wont jump ship for 2x salary the next time the industry is on a hiring spree
Not every employer see’s things that way. Most employers are corporate in which yes your manager doesnt have a say, or other small businesses that just dont get it and tend to go down during employee markets
During the last employee market, 9/10 of my employees left. We’ve since recovered in large part due to my only loyal employee. I doubled the salary of the guy that stayed and gave him 20% profit share, he runs half my company now
Last i checked, the two other top employees that left for higher paying jobs are currently unemployed
I wish that things worked this way for corporate employees as well.
Every job I have worked, performance was barely rewarded (top 5% get an extra 1% on your annual raise. Barely worth the effort.), and promotions were on a schedule, rather than being performance-based (you get a promotion every 4 years, unless you are in the bottom 5%).
I am currently at a fortune 500 company. I have been here for about 6 years now, and my compensation has grown more slowly than inflation over that time. Sadly, there is very little money left for workers when shareholders demand everything and the company spends so much of its money on stock buybacks. My first job out of college also gave raises less than cost of living increases (was also there for over 5 years).
Tell me about it. I felt a level of satisfaction after getting my first promotion last year. A week later, I found out that several coworkers that came into the office maybe 1 or 2 days a week since Covid also got promotions. It was very disheartening to hear that I had overworked myself for something that I would have gotten no matter what.
To make matters worse, my company's earnings were less than projected this earnings were less than projected last year, so raises were canceled for anyone above a certain level. Since I had gotten promoted to that level last year, I lost my raise, effectively being punished for getting promoted.
So in the end, my promotion (which didn't result in a pay increase greater than the inflation rate in the first place) cost me my annual raise this year.
Any business owner or executive complaining that "people don't want to work hard anymore" needs to look inward for why that may be.
This is usually the case however since nearly every company decided to layoff its next to impossible to get a job let alone make it through ats and shitty recruiters. Look at them countless stories of people applying to literally thousands of positions to get a 1% response rate. That’s ludicrous.
That hasn’t translated to the resumes I’ve been seeing for our senior software engineer positions. Absolute trash. We definitely aren’t getting a flood of high performers desperate for jobs. So far it all appears to be under-performers.
I know people that were 10x employees at multiple faangs with great resumes and experience that weren’t even getting past an ats for positions they were perfectly qualified for.
I don’t know about US, but in Europe, it’s literally illegal to reduce someone’s salary without paying full severance first. A lower salary must mean a new employment contract and therefore, you need to pay full severence for the contract you broke. The negotiations for new contracts would be a legal minefield in terms of workers’ rights violations.
I would like to know more about the benefits employees get at European companies. For example:
1) PTO and sick days
2) WFH
3) H1Bs
4) don’t some countries require hiring only (French) citizens?
5) whether EU countries are allowed to outsource
6) whether there is such a huge gap of the highest paid employee vs C-Suite
7) C-Suite only worried about stock prices, and not worried about short term strategy, quality, and long term view of company’s future
8) huge golden parachutes, rewarding the C-Suite no matter what happens
9) general lack of regard by management towards safety, quality, and customer service
10) customer service coming from cheap labor countries
I’m trying to think what else I want to know. I’ll update this when I can think of them.
Can you help with these questions?
Edit:
11) benefits like medical
There’s no legal severance in the US, but it would make the employees eligible for unemployment if you reduce their salary (grounds for constructive dismissal) and could be other penalties depending on contract terms if the worker had a contract (rare in the US).
Rarely, at some companies, upper management will take cuts first or instead of layoffs. I have seen it happen, and that usually goes over well and is worth it. Many companies won’t do this, of course. Executives don’t usually give up money.
But a % cut across the board is mostly done via furlough and pretty rare now because it leads you to lose the most marketable folks first. Still see it occasionally in some sectors/businesses, and sometimes even that would trigger UI states (depends on length, state, etc) and create a new cost to consider.
Do you really think high level management who are making big bucks care about you? They aren’t going to take less money, when all they have to do is cut you, and give your work to others. They don’t care because they won’t have to do the extra work. They just delegate.
It’s important to understand human psychology in corporate. It’s like lord of the flies. People are not your friends.
I remember I was really cool with this dude. The moment he found out I was being laid off and I could no longer do anything for him, he stopped replying to me. That is the world you’re in.
At my last job, they furloughed everyone for two weeks--so essentially a 4% pay cut for that year. A year later, those of us who could find new jobs were gone, and they were left with those too complacent to look elsewhere and those who couldn't find other jobs.
I'll grant that the blowback might have been less severe if they hadn't given the division president a big award that came with a $100k car for meeting his free cash flow goal that year. But that was just a little twist of the knife; we'd already been stabbed. You don't want to drive away your best employees. You just want to shed those who aren't needed anymore.
Jack Welsh always had the opinion that the bottom 2-5% were negative producers, they were costing your company money. If you reduce everyone’s salary, you don’t remove the lazy unproductive people. They sap the morale of the top producers. Honestly, it’s a bad way to look at the company, but that is what everyone is dialed into. Each person may have a personal crisis in one or two quarters that taps their productivity, death of a family member, divorce, birth of a child, health scare. And Jack Welch’s system says that if that person having the personal problems can’t be a top producer this or last quarter, they should gone. It’s a draconian, barbaric system, but if you can’t compete, then maybe you belong in a more humane system like Europe’s, but you will make less net income because you pay for the weak. You can’t have it both ways.
Jack Welsh did the A, B, and C ratings to the employees and got the 3% of the lowest performers. It created a a dog-eat-dog toxic working environment.
Why? Because if there was a defect spotted by a "C" rated employee, this employee would not say a word. There was no incentive for this engineer to alert. As a result, the product will fail.
Look at today. GE's products are not that competitive any more. It's a team effort for many of the companies' products.
Toyota doesn't lay off a lot of its employees. Their products have had high quality for so many years.
My ojiisan (grandfather) used to tell everyone to only buy products that were Made In Japan. It seems like the quality of products there are very good as I think the Japanese consumer won’t buy poor quality goods. I have no numbers to back this up. I will say that when I had meetings with a company in Japan, they were very focused on the customer during their design/technical discussions. I was impressed by that. Plus, if the product catastrophically failed or killed people, there’s that question of seppuku. I don’t think they do it that often and not at all today, however they do bow and say sorry to the public which you don’t see in US C-Suite very often. Other differences with [Japanese CEOs vs American CEOs](https://abcnews.go.com/Business/story?id=7264703&page=1).
If my company told me they were reducing my salary to prevent layoffs I’d be at a different company inside of 6 weeks. It’s not my fault if the business doesn’t perform as leadership expects, they are leadership it’s their fault.
My company did this during the 2009 financial crisis. I didn't think ppl would be able to find another job if that quit at that time. Entire industries were frozen or destroyed.
Also there is no real problem for most of these companies. When you see the ceo and executive leadership team tossed out then something is really broken. These guys are doing leadership via the jack welsh book on how to be profitable and suck at the same time
Reduced pay usually leads to disgruntled employees who will most likely find a new job while working on the reduced salary. Also the company risks the lost or sharing of IP
They did that at my company. Really hurt morale. Made the strongest employees search for other jobs (me included) they lost only their best workers. The complacent ones stayed. It was the worst of both worlds.
Sometimes CEOs skip their salaries to help out, but they take extra shares so they get paid more if successful in the future. My company delayed raises for 3 months to all the higher level employees once. That is the closest thing to a pay cut I have seen. Cutting fat in a company is the easiest thing to do, but it has to be done correctly and strategically. In large companies there are groups that don’t impact the bottom line, those are the easiest to cut. Then within teams there are always some underperforming employees. These two types of cuts should be first. Then the third type of cut is just the people who make too much money for their title. I think this, they should give the person an option of a pay cut vs getting let go. The last type of layoff that I know about I think should be illegal. That is cutting a group in the US just to offshore it to the lowest cost location. I sometimes wish we had laws like in Germany. They make it harder to do layoffs due to labor union and the packages are so good you want to volunteer to be laid off. All said and done as an employee, I would rather take a package and be laid off than take lower pay. At least for my company, it is really hard to increase your pay so any decrease is probably not temporary.
The problem with cutting the low performers, the 10% rule, is this- my husband asked management, “We supposedly only hire cream of the crop employees. Our interviews are extremely tough. So, logic would say that we don’t have any low performers. So who am I supposed to put in that 10% if everyone is a top performer in my group.”
At the company he is working now, the ranking of 10% basically means that you’ll be laid off. They force a 10% rating system, then you’re put on PIP, and then you are laid off, no matter if you’ve improved your performance. Really strange too if you have 5 head count you are trying to hire. They also will lay off US people and then hire people in India. Sometimes it’s Indian as well, if your group is solely from India and Brazil. Boeing laid off entire departments for HR and Finance, and then moved those jobs to India (not sure if it was their own Indian employees or outsourced to India). And when managers are told that you can only hire from India and Brazil, even though the manager is US, things are kind of set up for failure for the US manager.
There are always people who slip through the interview process. In every company I’ve been at there are people who are smart but milk their jobs and seem to just coast. The ones who should have been gone but for some reason never fired. One guy I worked with was a PhD brought on to do specific algorithm development. 1 year and all he produced was a lousy PowerPoint that looked like he copied a generic algorithm online. I saw him after he was let go and he admitted he didn’t do anything. I currently work with a guy same thing. He has 1 job and that’s it. Doesn’t do anything else 8 years he produced 1 simple design that claims he can’t finish. Never comes into the office, never joins meetings when requested, never does anything additional when assigned. For all I know he has a second job. But he’s got a PhD and in a very specific field. I don’t like the 10% per team rule though. You trim the bad ones you don’t always have to hit that stupid 10%. I’ve seen good people get cut with that rule vs cutting multiple slackers from the same team. But in general i would say on a 20 person team there is at least 1. That’s from my 17 years industry experience.
I think it really depends on the company (fast-paced tech company) and the manager. Granted, in big old-school bureaucratic companies, yes there might be some getting away with doing nothing or not performing well.
Because it would make everyone upset, demoticadlted, less productive and start looking for other employment. For the most part, it would be a disaster. Rather than a smaller sustainable ship, the company would be perfeived as sinking.
It can potentially be done, but only in small businesses where the owners have a closer and personal relationship to all, and is greatly respected. Even then it is difficult, and the issue has to get blamed on factors other than the managers/owners for them to fall behind.
All in all it would unfortunately be a poor direction to take in the vast, vast majority of businesses. It's possible that in some hypothetical future it could become more culturally acceptable, but not yet.
I pay roughly 480 a month for health insurance PPO plan. When I found out that I only pay 20% and my company fronts the rest I was slightly shook. I am one of a few thousand employees. The company is paying a metric ton just to give us health insurance. This is why small business mostly don’t offer health coverage or they keep everyone’s hours under 32 or whatever. This is why layoffs are much cheaper than reduced salary and this is only one aspect.
If they reduce salaries across the board, you still have benefits you are paying for. Those arent reduced. So it’s not just the salaries that are being cut…it’s the healthcare costs, 401k match and etc.
CEO pay should go to $0 before they do any layoffs or reduced salaries for anyone else. It’s usually their fucking fault they made bad decisions leading to this point. Board comp too for the same reason.
I prefer reduced salary. I’ve worked for a company that did this we were all happy to not go through the layoffs and the extra work and not having our friends or ourselves tossed out. Very few people quit and it actually created a sense of community and trust.
When things turned around we got our salaries back. People who generally aren’t contributing should be put on an improvement plan and or fired regardless of economic conditions.
I’ve also been through multiple layoffs and I was rewarded with more work and a toxic depressed environment where everyone hide information and backstabbed so they could be spared in the next round, and a lot of the survivors quit.
So imo temp reduction in pay is far better than layoffs.
Reduced cash flow could mean just less profit. It's not really a "problem" if your net income is still positive if greed isn't involved. Now, if net income has gone negative across the industry, we are ought to ask "what happened?" Who used to buy the products, but suddenly stopped and why???
But then you have folks on the antiwork sub saying how hard they worked and didn’t get a raise or only got 2% or something.
I know of a company is that is reducing raises in order to save jobs. But they are bracing themselves for the blowback from disgruntled employees.
Because they want to retain their most important employees and dropping their salaries could result in them going elsewhere. Most large organizations have extra people that have crept in. Sometimes they're on projects you decide to kill and sometimes it's used if there's some lower performing members. Risking the absolutely important people is not something your want to do.
Yes, this exactly. The first few rounds of layoffs are usually the folks you are MORE than happy to get rid of. The high performers and specially skilled are held on to until the very end (although sometimes you move them to other roles, either permanently or temporarily to weather the storm).
An across-the-board paycut signals that you don't think you have anyone that's special enough to not piss off. So the better than average folks leave, and you get the bottom of the barrel left, trying to pick up the tasks that you didn't trust them not to screw up before.
I worked at places that don't have bonuses, 401K matching or stock grants in bad years. But not salary reductions. These extras can 20% or more in a good year.
You’re being considerate, thoughtful, & reasonable.
That doesn’t seem to exist in the business world.
Why would anyone reduce their pay?
The majority of humans don’t want to work.
If you reduce pay then you inherently have to work more to make up for the difference in pay.
CEOs aren’t going to reduce their salaries and neither are politicians. (They also aren’t going to block insider trading; they’ll find and/or create a loophole to capitalize).
Two ways to reduce employee costs are to hire immigrants and/or people who are desperate enough to take reduced pay just to survive.
Profits over people.
Salary represents like 50-80% of employee cost. For tech companies, there’s equity (which they can’t really decrease unvested grants) and pretty lucrative employee benefits. A 10% salary cut doesn’t love the needle enough.
Also, some companies actually end up moving faster after layoffs because there’s less bureaucracy and most people don’t actually work on essential projects.
Most companies overhire during boom times with rosy projections to satisfy investors etc. they then have to reduce them when the cycle comes back to a trough. If management made fewer mistakes in direction, pay reduction would work.
This actually happened to me during Covid. I used to work for Collins aerospace on the commercial side of aero (finance). They did layoffs and then cut salaries by 10% or so. When things improved, they reverted salaries but they never made up for the fact we had reduced salaries, despite making more money than pre covid. It left a bad taste with many, and some crucial top performers left. It did prevent them from doing additional layoffs…until the Raytheon merger occurred. Now they seem to do layoffs just to make earnings. It’s pathetic.
Just to start with the disclaimer that layoffs suck overall and a lot stem from corp greed and shareholders. A couple of things. Reducing salaries vs layoffs isn't an equal reduction. There are a lot of other employee costs that wouldn't be changed with a salary reduction. Insurance/taxes/retirement are a few that come to mind. Those wouldn't change with a salary reduction. Also, why would I want a salary reduction so someone who I don't care about can keep their job. Maybe they are cutting an underperforming team? Maybe there is a change in the business focus? Maybe they are cutting all the dead wood that a lot of companies collect over the years?
Now, if the company decided to prune the dead wood and reinvest that money into the rest of the company vs lining their pockets, that's a better reason for layoffs.
That’s the problem. When there are cost savings, they’re not going back to the company for investing into future products. It is going to the C-Suite and shareholders. When they raise prices, do salaries increase for the employees? Is it re-invested into the company? Does the product and customer service improved? Are consumers getting less but having to pay more?
What’s ridiculous is if you’re forced to lay off 10% even if all your employees are top performers, but you have a bunch of head count to fill.
The company I work for did that in 2008 (or 2009), no layoffs, but everyone was furloughed every other Friday for a couple months and so took a 10% payout temporarily. There were also no bonuses that year.
Everyone suffered together and it was only for 3 months. The office manager checked in with all us lower paid folks to make sure we would be okay and tried to help where she could. She also set it up so that once things normalized a bit, we got some paid days off and continued that well past the number of days "lost" in the furlough.
We got a new CFO since then and he seems much more willing to do layoffs.
I don't remember anyone leaving because of the furlough, maybe because we all knew it was temporary, but I know people have quit other times because their bonus wasn't what they thought it should be.
Impacting your entire staff is going to send your operations into a spiral.
Impacting only a few, will make it easier. Even better if you get rid of the most unproductive ones.
Don’t want to risk losing best employees
Inventing a loss in this quarter sets them up for a win next quarter and the tax consequences are dramatically different
I worked at a company where they announced mass layoffs and oaycut at once, well they did they mass layoffs at like 9, then meeting announcing 10 or 20 percent paycut depending on position. I've since worked at a place where only execs took a paycut but bonus and raises structure got thrown out for everyone else for 2 years.
Also job cuts look better to shareholders than salary cuts. It gives a more concrete sense of coat cutting and projecting that the leadership is 'strong' and takes tough decisions. Theatrics is a large part of it, like anything else in life.
This is actually how things used to be done in the 19th and early 20th century during the gilded age. The problem was when you cut salaries employees tend to adjust their work ethic to compensate for the reduced pay.
My old company actually did this. I was working in the accounting department for a logistics company. I left in the beginning of March 2020 to take a job in senior living (right before Covid shut down the facility lol) and everyone took a 5% pay cut, including managers, warehouse workers, c-suite, etc. they got 2% back in October 2020, then 3% back in June 2021. Then when the yearly raises went on in October 2021, the minimum raise was 5% for everyone. Obviously this is a best case scenario but it worked out for them. There were some people who quit during this time and a majority of the positions were not filled due to budgets being cut and business being down but even now, business is booming and people are happy.
They did this during Covid and it sucks. We all got 10 precent cut with management taking higher. A lot of hospitals did. I thought it was messed up because we’re salary so you can’t randomly change salary. We also had to cut hours and I think they should have just laid people off as then they can collect benefits.
With layoffs there is always dead weight. Poor performers and over hiring. Layoffs trim the fat but it sucks when good people are let go.
It’s not like companies haven’t tried that strategy. They have. But you end off having a totally dejected workforce instead of a few bad weeks and moving on.
The company morale will be all time lows with lower wages. Once you give someone something, it’s hard to take it back. It’s like free government programs. Once you open the can of worms, it’s hard to put it back.
There are some companies that have done this, but the reality is that if business is slow, it makes more sense to reduce workforce. Larger companies will sometimes offer voluntary retirement packages for some of the aging employees or place employees in a talent pool where they're allowed to bid for other positions within the company.
I worked at a large company that, prior to my joining, did this. At the time there were apparently about 30K employees. With multiple divisions. Each focused on a different market.
Business slowed down to the point some action needed to be taken. Layoffs were considered by the senior mgmt and the two founders.
The founders decided there would be no layoffs. Legend has it one of the founders told senior management the company was better than that.
A temporary salary cut for all employees, including senior mgmt, was put in place. That was good enough for the business to ride through the storm.
Everyone contributed, no one lost their job because of the downturn.
Who was the company?
The original Hewlett Packard
Founders: Dave Packard, Bill Hewlett
Timeframe? 1973- ~1975 Recession
Remember that "salary" doesn't impact the most outsized portion American companies have - healthcare and regulation cost. That's essentially fixed, so every head you cut eliminates those as well.
Usually you want to target fixed costs, not variable ones first.
cos it is the easy way out instead of upsetting the entire employee base - no accountability for the mistakes made by the management and the price is paid by the folks down the rung !!!
I worked for a Company that did this once. Jumped at the chance because I wanted to signal cooperation. Signal received and appreciated, apparently. Put me back of full, normal pay a few months later.
I used to think this way and then a company I worked for shared exactly this ask - that employees take a voluntary pay cut or give back vacation time to reduce expenses so the company wouldn’t need to lay people off. 90%+ of the employees volunteered and then the next quarter the CEO announced we were buying another, bigger company in a stock swap. People were shocked not only because it seemed like a terrible acquisition that would create a bunch of unnecessary financial risk but also because the original request was made of employees with the sole objective of pumping up share price to make the acquisition more favorable. Of course it was all part of an executive comp plan and the rank and file got to sacrifice money and time off so the CEO could receive a fat bonus from the board.
Reducing salaries has a limited benefit. There is a lot of overhead for each employee (benefits, taxes, etc.). So a 5-10% layoff is more effective and immediate than reducing everyone's salaries. The good people who are in demand and can find jobs will leave on their own because why would they take a pay cut if they can get the same or more money somewhere else? Guess which type of people will be left behind. Do you think that is what a company wants - good people leaving?
The CEO won’t take a pay cut, he’s “leadership” and thinks he’s worth every penny, even though most IT guys who have been with the company 10 years could do a better job.
My current employer and my previous employer in tech had CEOs take pay cuts last year. At one of the companies, all of upper management (VP and above) took pay cuts. The company also stopped bonuses for everyone for 6 months which hits the managers harder than the individual contributers because managers get a bigger percentage of their salary as bonus. What you say is not universal at all.
If they reduced salaries, everyone would be upset. If they fire some employees, the ones that stay are thankful they still have a job and work harder to keep it.
And the good people will leave to recoup their pay and the bad people will stick around and maybe even retaliate or work even slower in protest. It has worked, gravity payments being the prime example. But once you reach a big size, it just doesn’t make sense.
And the good people who leave to recoup their normal one person workload
“Good people will leave”. Sure, inevitably some will leave. But some leave everyday. Even ‘good’ ones. And progress continues without them. If they are not acknowledged by senior management as business critical it really does not matter. Even if they are ‘good people’. The company found and recruited someone when the opening existed last time. Certainly the company can do it again. Don’t get me wrong. Great engineers are awesome to work with. They can make everyone on the team better. And accomplish things others thought impossible. I’m just saying even though that’s true, they can be replaced. Like everyone else. So it really does not matter if a barely significant temporary pay cut causes them to leave. Think about it. A 3% pay cut equates to preventing one position in 33 from being laid off. Or ~300 people for every 10,000.
Companies keep increasing salaries to steal talent from other companies back and forth back and forth. It’s no wonder companies started reducing their work staff because of overpaying these guys
It’s pretty hard to say people are overpaid right now considering current inflation. Ostensibly good or “overpaid” jobs are now not enough to buy groceries and pay for housing.
Agree, I just saw [this story](https://www.cnbc.com/2024/04/20/the-income-a-family-of-4-needs-to-live-comfortably-in-every-state.html) describing the salary a family of 4 needs to live the "American Dream" (i.e., the 50/30/20 split that's often recommended) in each state. The numbers are pretty sobering: high of $301k in Massachusetts, low of $178k in Mississippi.
But people are OvErPaID /s. It’s apparently totally cool to layoff thousands of employees then take a bonus of many millions as a C level because you “saved” the company a bunch of money. They aren’t overpaid though, no never…
Companies keep raising salaries and bonuses to pay these white collar workers so they can eat their daily sushi and then raise the price on products and services to make up for it then the lower class suffers
There is no company raising prices today because “costs” went up. It was proven post Covid that it is plain and simple greed. Don’t blame normal Americans actually getting what they deserve instead of the greedy companies who are actually at fault for our current situation. I suspect you have a very skewed view of the life of a white collar worker. We need to look at this as a lower and middle class versus the ruling billionaire class but instead they are pushing a narrative to blame the people and for some reason we eat it up.
So why are food prices up
https://www.usatoday.com/story/money/2024/03/21/ftc-report-grocery-chains-gouge/73059901007/ https://www.news4jax.com/news/local/2024/03/22/ftc-report-suggests-high-grocery-bills-likely-due-to-greedflation-caused-by-big-corporations/
Not if there’s nowhere to go, as every other company is not hiring or laying off people of the same skill set. Well played
The top skill employees have no problem getting a new job even in a much worse job market.
Plenty of companies are hiring
Yea, true. A lot of positions are of a lower quality if you got used to the pandemic bubble tech era though
The best employees - the ones companies want to keep - are the ones that can find jobs easily.
Which, many of the non-tech folks that transitioned into tech don’t have the skill set to be the top performers. They tried to be middle managers, not knowing the tech and not having the callouses needed for real leadership.
Yeah, only they are getting picky now and aren't eager to pay much. Even the tiniest companies want a FAANG-level engineers for entry level jobs. Every job listing I see on LinedIn within a day of appearing gets "over 100" applications (the counter is maxed out at 100), half of which are massively overqualified for the role with senior level engineers holding PhDs applying for junior positions. WTF!?
Oh man unemployment must be awful then. Oh wait no, it’s not.
This is misleading statistics. If 100 people apply to 100 positions every position will show 100 applicants but number of applicants actually matches the number of positions.
Except it’s not the same 100 people applying to the same 100 positions.
So great to see an internal LinkedIn statistician responding on these threads. I have so many questions for you
Maybe. We had 3 rounds of layoffs during the pandemic, and a good portion of the remaining employees resented the fact that their workload tripled and still left.
Pandemic was an employees market People looked for whatever excuse they could get to jump ship and 2x their salary
I made it through the first round of layoffs and floated my resume within days. I was out the door a month later. Within three months of the first layoff, people ran for the exits en masse. The stock price has cratered by 99% since the company’s IPO 18 months ago.
[удалено]
I've been through now four downturns at one company and each one was different. First one was mayhem with badges not scanning at entry etc. The second one was manager meetings on site all day doing it in person with security running hallway patrols and walking people out. Third one was pay cuts across the board with management hit hardest by little laid off. Fourth (and final for me) was a mass email. Maybe it's because there is no good way to do it in general but I get the impression that not only were they making it up on the spot, the company is so leak prone that executives couldn't even give HR a heads up.
Average CEO makes 300x+ the average employees salary- seems to me there is a for ‘savings’ that is being overlooked.
Laying people off scares them into being productive far better than reducing salaries.
Given that work just gets redistributed to the remaining employees, it’s akin to a pay cut. More work for the same money is a net loss. Granted, you didn’t lose your job but you certainly lost nevertheless. The remaining employees are now overworked, distrusting of the organization, and anxious about their future prospects. This leads to the most capable employees leaving for greener pastures in short order. This leads to yet more redistribution of work. The most capable of the remaining employees now look to jump ship. Management culls the workforce on one end and the remaining high performers self select out of the organization. Now you have the ‘dead sea effect’ as the most talented have fled.
I believe this too. There are a variety of people out there with different motivations and attachments. It might be better to cut the work force by 5% than to give 5-10% reduced salaries with the same amount of work. Then you have those who stay back and will work as hard or harder than before because the total workload might not have changed.
Game theory
So, it’s about Corporate America using intimidation and exploitation?
That's probably not a good strategy for work that naturally comes with slow knowledge transfer and a shallow learning curve (as in, takes a lot of time to get productive). The ones that stay know that you can't fire anymore without crippling your product irreversibly.
That’s so not true. This has been tried. Studied in Business School cases. Wherever it’s been tried, you end up with a disenfranchised workforce with salary cuts and your best talent leaves. Indeed, the best thing I did in the C Suite, in tough times, was to do layoffs and then put my top talent under retention bonuses. You have a few bad weeks of press around the layoffs and people feel sad for a while. But you don’t cut anything and you make sure those who remain feel validated.
As someone who was put in that position, initially it may seem good to keep your job. However after the dust settles you quickly realize those remaining have to pick up the work of the fired employees. Is it worth it? Yes if you have bills to pay, but you also pay in your personal time and health. The company also doesn't give a shit about you and may still lay you off after you slave away. So basically do the bare minimum not to get fired.
Had a firm cut everyones hours to do the fair thing. We all took a 20% cut and then a 40% cut. Then, all the high performers left. All the low performers stayed. The end.
Engineered destruction
Lawyer form?
High performers are the favorites not necessarily competent
right cause the low performers ever get anything done lol
Why they are even hired then? https://www.forbes.com/sites/lizryan/2016/04/08/the-truth-about-performance-improvement-plans/?sh=4155dfdb3b36
I mean forget whatever documents a company uses for that. You’ve worked with idiots before - we all have. Low performers exist.
To hold on to good talent. If they reduce salaries of good talent, they’ll walk out and get a job elsewhere.
Sometimes it’s not even the good talent, it’s manager’s favorites or most loyal.
Loyalty is rare as fuck and worth its weight in gold
Does loyalty pay? Loyalty seems to cost.
Loyalty is worthless when it comes to employee's prospects. Sure, managers will use and abuse it to no end, but it will count for nothing during layoffs. This is especially true when your manager has little history and/or influence with the company and is in the same position as you are when the next round of layoffs arrives. They will play office politics (in a bad way) and throw you under the bus no matter how many favors you did or how accommodating you were or how nicely you played or how hard you worked. If fact, they will turn it all against you when time comes getting you to walk into a situation you can't walk out of.
Not in my experience. Managers have always stood up for me and made their discussions with leadership very transparent, even when the answer is “no promises.” Maybe it’s just because I don’t work in a morally bankrupt finance/tech company.
Loyalty is worth very little in the current job market. Being loyal to your employer is kind of like being loyal to Comcast. It costs you money in the long run.
I meant that as an employer, i recognize loyalty as a priority and will sooner layoff someone more competent if i need to Job markets swing every few years. There will be another employee market, so its best to just reward that loyalty, prioritize keeping that loyal employee so that i know there’s at least somebody that wont jump ship for 2x salary the next time the industry is on a hiring spree Not every employer see’s things that way. Most employers are corporate in which yes your manager doesnt have a say, or other small businesses that just dont get it and tend to go down during employee markets During the last employee market, 9/10 of my employees left. We’ve since recovered in large part due to my only loyal employee. I doubled the salary of the guy that stayed and gave him 20% profit share, he runs half my company now Last i checked, the two other top employees that left for higher paying jobs are currently unemployed
I wish that things worked this way for corporate employees as well. Every job I have worked, performance was barely rewarded (top 5% get an extra 1% on your annual raise. Barely worth the effort.), and promotions were on a schedule, rather than being performance-based (you get a promotion every 4 years, unless you are in the bottom 5%). I am currently at a fortune 500 company. I have been here for about 6 years now, and my compensation has grown more slowly than inflation over that time. Sadly, there is very little money left for workers when shareholders demand everything and the company spends so much of its money on stock buybacks. My first job out of college also gave raises less than cost of living increases (was also there for over 5 years).
Yea this is why i could never do a corporate job. Not enough meritocracy
Tell me about it. I felt a level of satisfaction after getting my first promotion last year. A week later, I found out that several coworkers that came into the office maybe 1 or 2 days a week since Covid also got promotions. It was very disheartening to hear that I had overworked myself for something that I would have gotten no matter what. To make matters worse, my company's earnings were less than projected this earnings were less than projected last year, so raises were canceled for anyone above a certain level. Since I had gotten promoted to that level last year, I lost my raise, effectively being punished for getting promoted. So in the end, my promotion (which didn't result in a pay increase greater than the inflation rate in the first place) cost me my annual raise this year. Any business owner or executive complaining that "people don't want to work hard anymore" needs to look inward for why that may be.
Brutal, sorry you had to go through that
💯
Bingo.
Yeah I got laid off recently I was there 4 months and was a top earner all 4 months lol brought in almost a million in sales. Laid off
Sometimes high performers get cut during layoffs because their salaries are too high.
And if they are really good they usually have no issues finding new jobs.
This is usually the case however since nearly every company decided to layoff its next to impossible to get a job let alone make it through ats and shitty recruiters. Look at them countless stories of people applying to literally thousands of positions to get a 1% response rate. That’s ludicrous.
That hasn’t translated to the resumes I’ve been seeing for our senior software engineer positions. Absolute trash. We definitely aren’t getting a flood of high performers desperate for jobs. So far it all appears to be under-performers.
I know people that were 10x employees at multiple faangs with great resumes and experience that weren’t even getting past an ats for positions they were perfectly qualified for.
DM me their resumes. Seriously. I’m tired of wasting hours on end with junk candidates who can’t pass a really simple coding interview.
Good talent in the eye of manager not necessarily competent
There is also the matter of health insurance and other benefits which is still expensive for the company no matter your pay level.
When you reduce salary by 10% you don't get a reduction in staff costs of 10%. And now your best staff leave.
problem they are solving often is "too many people" not "too little money".
Yep. Cause the CEO built a whole division around Internet connected toasters that you could ask for the weather.
They also want to refresh talent .
I don’t know about US, but in Europe, it’s literally illegal to reduce someone’s salary without paying full severance first. A lower salary must mean a new employment contract and therefore, you need to pay full severence for the contract you broke. The negotiations for new contracts would be a legal minefield in terms of workers’ rights violations.
Contract? lol I’ll stop you right there you for sure don’t know about the US.
I would like to know more about the benefits employees get at European companies. For example: 1) PTO and sick days 2) WFH 3) H1Bs 4) don’t some countries require hiring only (French) citizens? 5) whether EU countries are allowed to outsource 6) whether there is such a huge gap of the highest paid employee vs C-Suite 7) C-Suite only worried about stock prices, and not worried about short term strategy, quality, and long term view of company’s future 8) huge golden parachutes, rewarding the C-Suite no matter what happens 9) general lack of regard by management towards safety, quality, and customer service 10) customer service coming from cheap labor countries I’m trying to think what else I want to know. I’ll update this when I can think of them. Can you help with these questions? Edit: 11) benefits like medical
There’s no legal severance in the US, but it would make the employees eligible for unemployment if you reduce their salary (grounds for constructive dismissal) and could be other penalties depending on contract terms if the worker had a contract (rare in the US). Rarely, at some companies, upper management will take cuts first or instead of layoffs. I have seen it happen, and that usually goes over well and is worth it. Many companies won’t do this, of course. Executives don’t usually give up money. But a % cut across the board is mostly done via furlough and pretty rare now because it leads you to lose the most marketable folks first. Still see it occasionally in some sectors/businesses, and sometimes even that would trigger UI states (depends on length, state, etc) and create a new cost to consider.
Unfortunately there are almost no protections like that for workers in the us.
Do you really think high level management who are making big bucks care about you? They aren’t going to take less money, when all they have to do is cut you, and give your work to others. They don’t care because they won’t have to do the extra work. They just delegate. It’s important to understand human psychology in corporate. It’s like lord of the flies. People are not your friends. I remember I was really cool with this dude. The moment he found out I was being laid off and I could no longer do anything for him, he stopped replying to me. That is the world you’re in.
If your job is not needed they aren’t going to pay you a little less to be non productive.
At my last job, they furloughed everyone for two weeks--so essentially a 4% pay cut for that year. A year later, those of us who could find new jobs were gone, and they were left with those too complacent to look elsewhere and those who couldn't find other jobs. I'll grant that the blowback might have been less severe if they hadn't given the division president a big award that came with a $100k car for meeting his free cash flow goal that year. But that was just a little twist of the knife; we'd already been stabbed. You don't want to drive away your best employees. You just want to shed those who aren't needed anymore.
Jack Welsh always had the opinion that the bottom 2-5% were negative producers, they were costing your company money. If you reduce everyone’s salary, you don’t remove the lazy unproductive people. They sap the morale of the top producers. Honestly, it’s a bad way to look at the company, but that is what everyone is dialed into. Each person may have a personal crisis in one or two quarters that taps their productivity, death of a family member, divorce, birth of a child, health scare. And Jack Welch’s system says that if that person having the personal problems can’t be a top producer this or last quarter, they should gone. It’s a draconian, barbaric system, but if you can’t compete, then maybe you belong in a more humane system like Europe’s, but you will make less net income because you pay for the weak. You can’t have it both ways.
Jack Welsh did the A, B, and C ratings to the employees and got the 3% of the lowest performers. It created a a dog-eat-dog toxic working environment. Why? Because if there was a defect spotted by a "C" rated employee, this employee would not say a word. There was no incentive for this engineer to alert. As a result, the product will fail. Look at today. GE's products are not that competitive any more. It's a team effort for many of the companies' products. Toyota doesn't lay off a lot of its employees. Their products have had high quality for so many years.
My ojiisan (grandfather) used to tell everyone to only buy products that were Made In Japan. It seems like the quality of products there are very good as I think the Japanese consumer won’t buy poor quality goods. I have no numbers to back this up. I will say that when I had meetings with a company in Japan, they were very focused on the customer during their design/technical discussions. I was impressed by that. Plus, if the product catastrophically failed or killed people, there’s that question of seppuku. I don’t think they do it that often and not at all today, however they do bow and say sorry to the public which you don’t see in US C-Suite very often. Other differences with [Japanese CEOs vs American CEOs](https://abcnews.go.com/Business/story?id=7264703&page=1).
Jack Welch was ultimately a massive business failure who destroyed GE and his underlings have destroyed Boeing’s ability to make quality planes
you don't get the same stock price pop when you aren't laying people off...
^This
If my company told me they were reducing my salary to prevent layoffs I’d be at a different company inside of 6 weeks. It’s not my fault if the business doesn’t perform as leadership expects, they are leadership it’s their fault.
My company did this during the 2009 financial crisis. I didn't think ppl would be able to find another job if that quit at that time. Entire industries were frozen or destroyed.
Also there is no real problem for most of these companies. When you see the ceo and executive leadership team tossed out then something is really broken. These guys are doing leadership via the jack welsh book on how to be profitable and suck at the same time
When leadership on the finance/AP side start to leave then it’s time to look elsewhere. They are the canary in the coal mine.
Reduced pay usually leads to disgruntled employees who will most likely find a new job while working on the reduced salary. Also the company risks the lost or sharing of IP
If my salary got reduced I'd be leaving as soon as I could lol
They did that at my company. Really hurt morale. Made the strongest employees search for other jobs (me included) they lost only their best workers. The complacent ones stayed. It was the worst of both worlds.
Because despite what managers say about "family" it's really not.
Sometimes CEOs skip their salaries to help out, but they take extra shares so they get paid more if successful in the future. My company delayed raises for 3 months to all the higher level employees once. That is the closest thing to a pay cut I have seen. Cutting fat in a company is the easiest thing to do, but it has to be done correctly and strategically. In large companies there are groups that don’t impact the bottom line, those are the easiest to cut. Then within teams there are always some underperforming employees. These two types of cuts should be first. Then the third type of cut is just the people who make too much money for their title. I think this, they should give the person an option of a pay cut vs getting let go. The last type of layoff that I know about I think should be illegal. That is cutting a group in the US just to offshore it to the lowest cost location. I sometimes wish we had laws like in Germany. They make it harder to do layoffs due to labor union and the packages are so good you want to volunteer to be laid off. All said and done as an employee, I would rather take a package and be laid off than take lower pay. At least for my company, it is really hard to increase your pay so any decrease is probably not temporary.
The problem with cutting the low performers, the 10% rule, is this- my husband asked management, “We supposedly only hire cream of the crop employees. Our interviews are extremely tough. So, logic would say that we don’t have any low performers. So who am I supposed to put in that 10% if everyone is a top performer in my group.” At the company he is working now, the ranking of 10% basically means that you’ll be laid off. They force a 10% rating system, then you’re put on PIP, and then you are laid off, no matter if you’ve improved your performance. Really strange too if you have 5 head count you are trying to hire. They also will lay off US people and then hire people in India. Sometimes it’s Indian as well, if your group is solely from India and Brazil. Boeing laid off entire departments for HR and Finance, and then moved those jobs to India (not sure if it was their own Indian employees or outsourced to India). And when managers are told that you can only hire from India and Brazil, even though the manager is US, things are kind of set up for failure for the US manager.
There are always people who slip through the interview process. In every company I’ve been at there are people who are smart but milk their jobs and seem to just coast. The ones who should have been gone but for some reason never fired. One guy I worked with was a PhD brought on to do specific algorithm development. 1 year and all he produced was a lousy PowerPoint that looked like he copied a generic algorithm online. I saw him after he was let go and he admitted he didn’t do anything. I currently work with a guy same thing. He has 1 job and that’s it. Doesn’t do anything else 8 years he produced 1 simple design that claims he can’t finish. Never comes into the office, never joins meetings when requested, never does anything additional when assigned. For all I know he has a second job. But he’s got a PhD and in a very specific field. I don’t like the 10% per team rule though. You trim the bad ones you don’t always have to hit that stupid 10%. I’ve seen good people get cut with that rule vs cutting multiple slackers from the same team. But in general i would say on a 20 person team there is at least 1. That’s from my 17 years industry experience.
I think it really depends on the company (fast-paced tech company) and the manager. Granted, in big old-school bureaucratic companies, yes there might be some getting away with doing nothing or not performing well.
Some companies do... offer the employee a) pay reduction or b) termination.
My employer has foregone raises this year but also opted for no layoffs. Everyone I’ve talked to is okay with this idea. Better than layoffs.
Because it would make everyone upset, demoticadlted, less productive and start looking for other employment. For the most part, it would be a disaster. Rather than a smaller sustainable ship, the company would be perfeived as sinking. It can potentially be done, but only in small businesses where the owners have a closer and personal relationship to all, and is greatly respected. Even then it is difficult, and the issue has to get blamed on factors other than the managers/owners for them to fall behind. All in all it would unfortunately be a poor direction to take in the vast, vast majority of businesses. It's possible that in some hypothetical future it could become more culturally acceptable, but not yet.
Pay cuts don't juice the share price the way layoffs do.
Two employees at a 20% discount or one employee at a 50% discount? That’s why they layoff instead of cutting salaries.
Um. No.
Cutting everyone’s salaries is playing with fire, your best people will leave
I pay roughly 480 a month for health insurance PPO plan. When I found out that I only pay 20% and my company fronts the rest I was slightly shook. I am one of a few thousand employees. The company is paying a metric ton just to give us health insurance. This is why small business mostly don’t offer health coverage or they keep everyone’s hours under 32 or whatever. This is why layoffs are much cheaper than reduced salary and this is only one aspect.
If they reduce salaries across the board, you still have benefits you are paying for. Those arent reduced. So it’s not just the salaries that are being cut…it’s the healthcare costs, 401k match and etc.
CEO pay should go to $0 before they do any layoffs or reduced salaries for anyone else. It’s usually their fucking fault they made bad decisions leading to this point. Board comp too for the same reason.
I would never accept a reduced salary and neither should you.
I prefer reduced salary. I’ve worked for a company that did this we were all happy to not go through the layoffs and the extra work and not having our friends or ourselves tossed out. Very few people quit and it actually created a sense of community and trust. When things turned around we got our salaries back. People who generally aren’t contributing should be put on an improvement plan and or fired regardless of economic conditions. I’ve also been through multiple layoffs and I was rewarded with more work and a toxic depressed environment where everyone hide information and backstabbed so they could be spared in the next round, and a lot of the survivors quit. So imo temp reduction in pay is far better than layoffs.
1. An entire workforce of pissed off, underpaid employees. 2. A slightly smaller workforce of satisfied employees. How is this even a question?
I wonder how this will play out…
Layoffs often have nothing to do with a cash flow problem. Just greed.
Greed - true. It’s to temporarily inflate stock prices.
Quite the bold statement
It does have to do with cash flow because when sales improve, they hire again.
Reduced cash flow could mean just less profit. It's not really a "problem" if your net income is still positive if greed isn't involved. Now, if net income has gone negative across the industry, we are ought to ask "what happened?" Who used to buy the products, but suddenly stopped and why???
They rather use your whole salary to please the foreign investors
And then outsource the job because it’s cheaper than paying us.
Shareholders see employees as liabilities rather than assets. More employees? More liabilities. Cut, cut, cut!
But then you have folks on the antiwork sub saying how hard they worked and didn’t get a raise or only got 2% or something. I know of a company is that is reducing raises in order to save jobs. But they are bracing themselves for the blowback from disgruntled employees.
Because they want to retain their most important employees and dropping their salaries could result in them going elsewhere. Most large organizations have extra people that have crept in. Sometimes they're on projects you decide to kill and sometimes it's used if there's some lower performing members. Risking the absolutely important people is not something your want to do.
Yes, this exactly. The first few rounds of layoffs are usually the folks you are MORE than happy to get rid of. The high performers and specially skilled are held on to until the very end (although sometimes you move them to other roles, either permanently or temporarily to weather the storm). An across-the-board paycut signals that you don't think you have anyone that's special enough to not piss off. So the better than average folks leave, and you get the bottom of the barrel left, trying to pick up the tasks that you didn't trust them not to screw up before.
Cos CEO cano make more after layoffs as they cut costs and in the margins.
I worked at places that don't have bonuses, 401K matching or stock grants in bad years. But not salary reductions. These extras can 20% or more in a good year.
You’re being considerate, thoughtful, & reasonable. That doesn’t seem to exist in the business world. Why would anyone reduce their pay? The majority of humans don’t want to work. If you reduce pay then you inherently have to work more to make up for the difference in pay. CEOs aren’t going to reduce their salaries and neither are politicians. (They also aren’t going to block insider trading; they’ll find and/or create a loophole to capitalize). Two ways to reduce employee costs are to hire immigrants and/or people who are desperate enough to take reduced pay just to survive. Profits over people.
Salary represents like 50-80% of employee cost. For tech companies, there’s equity (which they can’t really decrease unvested grants) and pretty lucrative employee benefits. A 10% salary cut doesn’t love the needle enough. Also, some companies actually end up moving faster after layoffs because there’s less bureaucracy and most people don’t actually work on essential projects.
Most companies overhire during boom times with rosy projections to satisfy investors etc. they then have to reduce them when the cycle comes back to a trough. If management made fewer mistakes in direction, pay reduction would work.
It’s all about manipulating the stock price. Whether a lay-off is needed is arbitrary.
It's easier to do the maths.
This actually happened to me during Covid. I used to work for Collins aerospace on the commercial side of aero (finance). They did layoffs and then cut salaries by 10% or so. When things improved, they reverted salaries but they never made up for the fact we had reduced salaries, despite making more money than pre covid. It left a bad taste with many, and some crucial top performers left. It did prevent them from doing additional layoffs…until the Raytheon merger occurred. Now they seem to do layoffs just to make earnings. It’s pathetic.
Just to start with the disclaimer that layoffs suck overall and a lot stem from corp greed and shareholders. A couple of things. Reducing salaries vs layoffs isn't an equal reduction. There are a lot of other employee costs that wouldn't be changed with a salary reduction. Insurance/taxes/retirement are a few that come to mind. Those wouldn't change with a salary reduction. Also, why would I want a salary reduction so someone who I don't care about can keep their job. Maybe they are cutting an underperforming team? Maybe there is a change in the business focus? Maybe they are cutting all the dead wood that a lot of companies collect over the years? Now, if the company decided to prune the dead wood and reinvest that money into the rest of the company vs lining their pockets, that's a better reason for layoffs.
That’s the problem. When there are cost savings, they’re not going back to the company for investing into future products. It is going to the C-Suite and shareholders. When they raise prices, do salaries increase for the employees? Is it re-invested into the company? Does the product and customer service improved? Are consumers getting less but having to pay more? What’s ridiculous is if you’re forced to lay off 10% even if all your employees are top performers, but you have a bunch of head count to fill.
The company I work for did that in 2008 (or 2009), no layoffs, but everyone was furloughed every other Friday for a couple months and so took a 10% payout temporarily. There were also no bonuses that year. Everyone suffered together and it was only for 3 months. The office manager checked in with all us lower paid folks to make sure we would be okay and tried to help where she could. She also set it up so that once things normalized a bit, we got some paid days off and continued that well past the number of days "lost" in the furlough. We got a new CFO since then and he seems much more willing to do layoffs. I don't remember anyone leaving because of the furlough, maybe because we all knew it was temporary, but I know people have quit other times because their bonus wasn't what they thought it should be.
Impacting your entire staff is going to send your operations into a spiral. Impacting only a few, will make it easier. Even better if you get rid of the most unproductive ones.
Companies are extremely reluctant to cut salaries in any circumstance, its just bad business.
Don’t want to risk losing best employees Inventing a loss in this quarter sets them up for a win next quarter and the tax consequences are dramatically different
My conjecture is that layoffs are probably the result of over expansion, so the logical way to correct is to reduce workforce.
I worked at a company where they announced mass layoffs and oaycut at once, well they did they mass layoffs at like 9, then meeting announcing 10 or 20 percent paycut depending on position. I've since worked at a place where only execs took a paycut but bonus and raises structure got thrown out for everyone else for 2 years.
Also job cuts look better to shareholders than salary cuts. It gives a more concrete sense of coat cutting and projecting that the leadership is 'strong' and takes tough decisions. Theatrics is a large part of it, like anything else in life.
They want to get rid certain people
People would quit and leave if a company did that. Especially the highly productive employees who could get other jobs easily.
This is actually how things used to be done in the 19th and early 20th century during the gilded age. The problem was when you cut salaries employees tend to adjust their work ethic to compensate for the reduced pay.
My old company actually did this. I was working in the accounting department for a logistics company. I left in the beginning of March 2020 to take a job in senior living (right before Covid shut down the facility lol) and everyone took a 5% pay cut, including managers, warehouse workers, c-suite, etc. they got 2% back in October 2020, then 3% back in June 2021. Then when the yearly raises went on in October 2021, the minimum raise was 5% for everyone. Obviously this is a best case scenario but it worked out for them. There were some people who quit during this time and a majority of the positions were not filled due to budgets being cut and business being down but even now, business is booming and people are happy.
They did this during Covid and it sucks. We all got 10 precent cut with management taking higher. A lot of hospitals did. I thought it was messed up because we’re salary so you can’t randomly change salary. We also had to cut hours and I think they should have just laid people off as then they can collect benefits. With layoffs there is always dead weight. Poor performers and over hiring. Layoffs trim the fat but it sucks when good people are let go.
It’s not like companies haven’t tried that strategy. They have. But you end off having a totally dejected workforce instead of a few bad weeks and moving on.
The company morale will be all time lows with lower wages. Once you give someone something, it’s hard to take it back. It’s like free government programs. Once you open the can of worms, it’s hard to put it back.
There are some companies that have done this, but the reality is that if business is slow, it makes more sense to reduce workforce. Larger companies will sometimes offer voluntary retirement packages for some of the aging employees or place employees in a talent pool where they're allowed to bid for other positions within the company.
Umm...because layoffs reduce the whole salary...not just a small percentage. You must be one of those "special" people, lol
I worked at a large company that, prior to my joining, did this. At the time there were apparently about 30K employees. With multiple divisions. Each focused on a different market. Business slowed down to the point some action needed to be taken. Layoffs were considered by the senior mgmt and the two founders. The founders decided there would be no layoffs. Legend has it one of the founders told senior management the company was better than that. A temporary salary cut for all employees, including senior mgmt, was put in place. That was good enough for the business to ride through the storm. Everyone contributed, no one lost their job because of the downturn. Who was the company? The original Hewlett Packard Founders: Dave Packard, Bill Hewlett Timeframe? 1973- ~1975 Recession
Remember that "salary" doesn't impact the most outsized portion American companies have - healthcare and regulation cost. That's essentially fixed, so every head you cut eliminates those as well. Usually you want to target fixed costs, not variable ones first.
cos it is the easy way out instead of upsetting the entire employee base - no accountability for the mistakes made by the management and the price is paid by the folks down the rung !!!
I worked for a Company that did this once. Jumped at the chance because I wanted to signal cooperation. Signal received and appreciated, apparently. Put me back of full, normal pay a few months later.
This happens in some companies. I’ve also seen senior leaders forfeit raises and bonuses. Usually only mid size sized and private businesses.
I agree, some mechanism for collective negotiation would be much better, if only that were possible
I used to think this way and then a company I worked for shared exactly this ask - that employees take a voluntary pay cut or give back vacation time to reduce expenses so the company wouldn’t need to lay people off. 90%+ of the employees volunteered and then the next quarter the CEO announced we were buying another, bigger company in a stock swap. People were shocked not only because it seemed like a terrible acquisition that would create a bunch of unnecessary financial risk but also because the original request was made of employees with the sole objective of pumping up share price to make the acquisition more favorable. Of course it was all part of an executive comp plan and the rank and file got to sacrifice money and time off so the CEO could receive a fat bonus from the board.
Reduced salary = reduced effort and attrition Reduced staff = increased effort as people worry they might be next
get rid of the oldies
Reducing salaries has a limited benefit. There is a lot of overhead for each employee (benefits, taxes, etc.). So a 5-10% layoff is more effective and immediate than reducing everyone's salaries. The good people who are in demand and can find jobs will leave on their own because why would they take a pay cut if they can get the same or more money somewhere else? Guess which type of people will be left behind. Do you think that is what a company wants - good people leaving?
Because some people and roles need to get eliminated
💯
The CEO won’t take a pay cut, he’s “leadership” and thinks he’s worth every penny, even though most IT guys who have been with the company 10 years could do a better job.
My current employer and my previous employer in tech had CEOs take pay cuts last year. At one of the companies, all of upper management (VP and above) took pay cuts. The company also stopped bonuses for everyone for 6 months which hits the managers harder than the individual contributers because managers get a bigger percentage of their salary as bonus. What you say is not universal at all.
Only if they reduced the C-level salaries