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Would you take a pay cut?

December 11, 2008

A small but growing number of companies are considering asking their workers to take a pay cut as a means of cutting costs without having to fire anyone.

In the latest example, three unions representing steelworkers at Corus have offered to take a 10 percent cut across the company’s entire UK workforce of 25,000 for six months in an attempt to save one of the last remaining steel factories in Britain — the plant at Llanwern in Newport, South Wales.

The steelmaking part of Llanwern was shut in 2001 with 1,300 redundancies but the site still makes steel sheets and employs more than 1,000 people.

India’s Tata Group, which bought the Anglo-Dutch company last year, has said it wants to cut costs by 350 million pounds in both the UK and the Netherlands as it cuts production by 30 percent.

Other possible solutions include cutting employees’ working hours. Corus in the Netherlands, for example, is asking 6,400 workers to each work one day less perweek for six weeks — the equivalent of cutting 1,100 full-time jobs.

In another example, engineering firm JCB has managed to limit job losses after the GMB union agreed to accept a shorter and lower-paid working week

As the downturn bites and announcements of  huge job losses become a daily event, do you think such solutions are the answer. Would you take a pay cut? Or is there an element here of employers using the dire economic situation to extract unfair concessions from their workforces?

Comments

only fools would ask for a pay rise under the present and future financial crisis.
If the unions hold out for a pay rise, then they must be reasponsable for any job losses

Posted by Peter Bowling | Report as abusive
 

I would be willing to take a pay cut, e.g., a percentage of my gross, BUT, a hard requirement would be that every employee from top to bottom, bonuses, salary, whatever, had the same percentage cut applied. Nobody excepted, especially including the exec staff, board members and receivers of dividends.

Posted by Bob Urschel | Report as abusive
 

A very dangerous road to go down so be careful:

1. Companies seldom ever keep their word. I am in my 40s and have worked at a few different companies so have seen this before. I am telling you from experience that you can not guarantee there will not later be further sacrifices required or the redundancies the firm was going to make in the first place.

2. Are the CEO & Co going to lead by example volunteering a salary cut themselves – more than likely not. Part of their end of year compensation, or bonus to you and me, is generated from from containing/cutting costs. If this bonus is received in deferred option compensation schemes it will be particularly hard to detect.

3. Will you be rewarded when the economy gets better? Bearing in mind point 2, probably not.

Good luck.

Posted by nick | Report as abusive
 

The powers that be should all take half pay, and sell their second homes, or invite us all in for xmas since we the ordinary working class cant afford to heat our homes, why take a pay cut on a wage that is already low.

Posted by cathie | Report as abusive
 

My company has actually just offered me a pay rise to retain my services.

Posted by Charles Smyth-Watson | Report as abusive
 

I would be willing to consider taking a pay cut, but only if compensated by sufficient equity. It is the responsibility of management to ensure that they can meet the wage bills they agreed… during good times they took the profits as bonuses – during the bad, while I’m sympathetic to cash flow problems, if the business is solvent, then employees accepting a pay reduction should be compensated with a substantial stake in the company by way of alternate remuneration.

Posted by Steve | Report as abusive
 

I would have to say No! and ask for the redundancy package. The credit crisis has been on the cards for sometime and I’ve seen no change in cost control from the senior managers here, still flying business class etc. Even going back a few years I was made redundant when the company I worked for went into administration, the FD and MD there was still charging the company their private membership to Wentworth golf club. They both new cash flow was tight but did nothing to help themselves.

I think salary cuts should be made at senior level first before even looking and the work force, but we don’t live in that kind of society.

Posted by Charles | Report as abusive
 

I think it to be only right that pay cuts are excepted. Its either that or lose your job. Its a no brainer.

Posted by Tarek | Report as abusive
 

I would, if there was some kind of guarantee that 1) my job would be saved and 2) previous salary would be restored once conditions allowed

Posted by Geoff | Report as abusive
 

Just shows how crazy all those strikes were in the autumn!

Would I take a pay cut? I suppose in theory, yes, a pay cut is better than no job at all. But I’d make sure I was putting a lot of effort into finding a new job.

If I couldn’t get one then you just have to accept your market value and get on with it. I guess that’s what annoys me about the strikers so much, if they hated their pay and conditions so much… why not get a new job? Perhaps because they are already getting a fair wage for what they are doing and a lot of them are being greedy.

Posted by Grant | Report as abusive
 

Anyone who values their job will take a pay cut if the necessity for the action is properly explained to them and it is demonstrated that the cut is spread equally across the whole workforce.

There will always be a few managers who expect that only the “workers” should take a cut and there will always be a few workers who would rather see their employer go bust than co-operate in any way to keep the enterprise going.

Hopefully in both the boardroom and on the shopfloor, the majority of people with a bit of common sense will prevail.

Posted by Peter H | Report as abusive
 

Funny this comes up on the Reuters website given they have just asked all contractors in the UK to take a 10% pay cut.

Posted by TR Contractor | Report as abusive
 

It would be far better if UK companies gave UK employees the option to accept lower wages than outsourcing overseas to lower paid contract workers.
If UK workers understood that a company had no option than to lower its outgoings or go bankrupt surely UK workers would be prepared to accept a short term lower wage than no wage at all!
The Government should step in to access all considered overseas outsourcing by UK based companies.

Posted by valerie | Report as abusive
 

pay cuts just another step on the road to deflation.
if we are not careful we could end up with something
far worse than just a recession a very bad slump.

Posted by stephen webster | Report as abusive
 

I would accept a 20% cut in salary to help conserve my job and my industry provided the percentage drop was across the board including all ceos. The cost of conserving a job must be less than that spent in creating new jobs and thats without considering the loss of esteem and financial pressure caused by unemployment.

Posted by AM Afifi | Report as abusive
 

No i would not take a pay cut. once they do this where does it end.
lets not forget the utility companies will not easily cut prices nor will the council tax go down.Bills still have to be paid.

People have been brainwashed and are now motivated by fear companies are using this once in a lifetime situation to implement everthing they ever dreamed of doing but never dared now they have the perfect excuse.

Good luck the axe will fall regardless of any cut anyone takes. theres always a handy excuse waiting around the corner.

Posted by PD | Report as abusive
 

The theory is fine but unless absolutely everyone in the company agrees it would not work. It wouldn’t be fair for only some employees to take the cut. For this reason I can’t see that it would ever work.

Posted by Mark | Report as abusive
 

Just had to take a 15% rate cut, so it is common for contractors. Maybe the companies should consider it an option for established staff too.

Posted by IT Contractor | Report as abusive
 

The suggestion of asking the workforce to accept wage reduction has dark undertones. Does this include at all levels in management? Also how long would this need to be implemented?
This is certainly an option for management to exploit without any compunction at all. The best option is still laying people off; for them to be re-enployed when the current recession has come to an end. The skills learned will always be in demand so keeping the workforce at a reduced rate undermines the value of the workers’ skills.

John Brown

 

i would by willing to take pay cut if it ment keeping my job what i do not agree with is government giving out fuel payments again, to all people on benefits;i am single parent and work hard i will not be getting this, when is the government going to sort out these dossers?

 

I would be willing to take a pay cut, however, would a CEO, board of directors be willing to give up their high salaries and bonuses to fight against this economic crisis and save the comapany?

Posted by Frank Garcia | Report as abusive
 

I would be willing providing such asn intiative was led on a top down basis with the board of directors leading the way but would also like to see an agreed benchmark for early redemption if the market recovers.

Posted by mark wells | Report as abusive
 

BE CAREFUL is my message to anyone who would still feel at risk and accept a pay cut. (I agree with ‘Nick’ in the earlier comments) Clarify your pension and possible redundancy details. Is your pension going to be affected by your final salary agreement at the lower rate, and thus saving the company money when they make you redundant anyway?
An engineering company mentioned in the report imposed a freeze on the pay to its staff, then made redundancies anyway. This affected the final salary and the redundancy payments. Unfair?

Posted by Anonymous (name linked to email) | Report as abusive
 

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