How to Manage a Pay Cut in A Corporate Job.

Imagine a day where you log in to your job, full of energy and intentions to do your best at the work, talk with your work buddies, share a weekend story and then log out peacefully. Sounds just a perfect day at a office ay. Now put an company wide meeting with the director in your schedule. The meeting starts and the bomb is dropped. Certain % of your salary will be reduced for the next few months due to some cost cutting measures taken by the company in order to bridge the gap between the expected and the actual revenue. Yes that's how you ruin the perfect day at office to the worst day at office.

If you have been a part of the company for a while and if you are in the financial loop for the company such decisions won't come to you as a surprise. While if you have just started with the company, then this might shock you well enough to create a panic situation.

What is a Pay Cut?

Usually a pay cut is slashing your salary by a certain percentage for whatever business reasons. During a financial crises in the company the management might decide to slash payments for their employees either across the board or just for a particular team. This can be done in order to implement some cost cutting measures due to some financial crises within the company. Also a pay cut strategy is used as an alternative to laying off of the employees. Pay cut can eventually increase the attrition which solves the purpose of the whole cost cutting strategy.

Understand the Nature of Pay Cut

Pay cuts may feel however unfair or brutal at times, it is important to understand that pay cut is anytime better than asking employees to go. Lay offs are brutal, take for example the case of Better.com who laid off some 900 employees over a zoom call. There is nothing disastrous for any employee who has been communicated to cease his/her employment with the company. Going from an employed professional to suddenly an unemployed one can cause major distress as finding a new job on the spot is a difficult task.

Hence, understand a pay cut. Below are some questions you might need to answer in order to understand the nature of the pay cut at your company - HR professionals at your company can prove to be the best contributors to the following questions answers. -

why is there a pay cut?

is there any alternate for a pay cut?

how does the pay cut affects you and your power of spending?

how long with the pay cut stay in place?

is the duration of a pay cut an long term act or a short term act, considering your financial

situation?

is this a one time thing or there are chances of future pay cuts?

what is company's action plan to reverse the situation?

will your responsibilities change for the role you are employed for?

what is the overall vibe with your colleague?

what explanation does your HR gives for the pay cut?

accept the decision or....

Now that you have understood the nature of the pay cut, you must be having a clear idea of the way outs. The next step would be accepting the decision or not to accept the decision. Accepting pay cuts can initially be a difficult choice but if you have faith in the company and its ability to bounce back you should be fine eventually accepting it. While not accepting the pay cut, will only put you in a series of mood swings, frustrations, anger and lack of concentration at the work place. Without wasting a lot of time you should either choose to be with the company or against the company. Choosing to be against the company will need a lot of immediate actions to secure your next financially stable endeavour.

Action plan -

Now whether you choose to accept or not accept the pay cut after understanding its nature, it is important to have an action plan to manage your financials. Tracking expenses, cutting down on your spends on unnecessary things and looking out for other modes of income can be few steps you can take. If an pay cut is going to be in effect for a short period of time, lets say 6 months, then it would be easier to cut down on some unnecessary or compulsory expenses like may be that Netflix subscription or cutting down on ordering food from outside or cutting down on your travel for those 6 months.

While if the pay cut would be in effect for a longer period of time then it would be highly challenging in order to cut down on expenses as it would need you to have a change in lifestyle. Planning for a loan can also be a considerable option as you can repay it once the things take normal course of action. Borrowing from a friend or your relative can prove to be great help as well. Also you can make use of this opportunity and focus on building a passive income source. This may be taking up an consulting work, starting a blog or a vlog, freelancing within your skills set or tutoring.

negotiate

No matter what you decide to so with the pay cut decision, never shy away from negotiating. No company is happy to announce pay cuts as they are pretty much aware of the hit this decision can cause to the company's goodwill. Pay cuts usually tends to push a lot of employees out of the company. Hence the company might try its best to save its best resources by extending various other benefits. Like for example, extra leaves being added to your bucket, might reduce the pay cut percentage depending on your previous performance, can compensate lost salary in terms of shares, gifts, etc. But all of this only if you ask for it. You may be allowed to work from home until things get normal, they might change your shift timings, or they can offer you a better position. So don't hesitate to explore all the options to negotiate on the pay cut.

Is this the time to leave?

The important question that will keep you haunting throughout the pay cut period will be - to whether stick with the company or look out for job outside? Although very valid question, understanding the nature of pay cut will help you answer it. You can stay with the company if you believe that everything will be fine soon. This way you can also earn those trust points from the company which the company can later choose to reward or compensate you in some or the other form. While if you don't feel comfortable with this pay cut you can start looking out for jobs outside. It is highly recommended to research the market before you decide on quitting your current job. It is always better to hold a job with a pay cut rather being unemployed for few months.