How to Deal with Pay Cuts

It may be in your best interest to accept a pay cut, but you can be proactive at the same time.
It may be in your best interest to accept a pay cut, but you can be proactive at the same time. (Adobe stock images)

Imagine this: Your employer says you're going to get a pay cut. Short of quitting, what can you do? Is there any room to negotiate before accepting the reduction? And how do you deal with the anxiety that comes with a smaller salary?

It may be in your best interest to accept the decrease, but you can be proactive at the same time.

Make a list of questions to ask your manager. For example:

How long will the reduction in compensation last? This may be a difficult question to answer, especially if the reduction is the result of a general downturn in business.

Will the decrease adversely affect any of your benefits? If so, which ones and how much? For many people, benefits are enormously important, especially health insurance coverage. Salary is the most common area in which reductions are made, and it is unlikely benefits will be cut, but you could be asked to contribute a larger percentage to the monthly premiums. Health insurance costs are usually the second-largest expenditure in any business and something you certainly don't want to lose -- even if your out-of-pocket contribution goes up.

Will the decrease be across the board or just within certain departments? Generally speaking, pay cuts are implemented throughout the company. If they're not, you may want to quietly start your own job search. It's not fair to have some employees taking pay cuts and not others.

When will the reduction take effect? You need to know this so you can plan ahead in managing your finances.

Other Things to Consider

Another point to investigate is whether bonuses will be affected. Sometimes, especially for people involved in selling, bonuses are not affected since they're based on meeting sales goals. If bonuses are paid to everyone, they're usually based on the company's general profitability, so it's possible they will also be suspended until profits increase. Bonuses, especially if you're not in a sales position, should be viewed as perks that aren't necessarily entitlements and may not always be there.

Are There Any Trade-offs to Lower Pay?

Aside from compensation and benefits, the next most important thing to most people is time. If a pay reduction is unavoidable, it may be possible for you to negotiate additional unpaid time off. For instance, if you're asked to take a 10% reduction in pay, you could ask for an equal reduction in time spent on the job.

Perhaps you can suggest taking Friday afternoons off during the period of reduction. It's not more money in your pocket, but at least it's time you can have for other things. On the flip side, there is something to be said for being a team player during tough times. Most employers will remember the employees who are dedicated enough to work the same number of hours for less compensation.

How do you address a decrease in pay in your salary history? Be honest about it. For instance, if you know that the company had been struggling during tough economic times, acknowledge that in your salary history. If an across-the-board pay cut was instituted, just state it honestly. If the prospective employer checks references, that cut can easily be confirmed.

While nobody wants a pay cut, it happens. But as with any bump on your career path, it's how you react to it that matters most.

Want to Know More About the Military?

Be sure to get the latest news about the U.S. military, as well as critical info about how to join and all the benefits of service. Subscribe to and receive customized updates delivered straight to your inbox.

Show Full Article
Veteran Jobs