Sunday, April 05, 2009

THE RIGHT THING: `WE'LL CUT YOUR PAY TO SAVE HIS JOB'

During a minor economic downturn in the early 1990s, a former employer of mine was seeking ways to save money.

For years the company had staged lavish holiday parties around Christmas, often renting out a museum or a large catering hall for a sit-down dinner and party. Because money wasn't flowing as freely this year, however, he took a different approach.

Each department was allocated a modest budget to stage an event in its offices to which the rest of the company would be invited. One department hired a photographer to shoot group photos. Another hired a tarot-card reader. Employees brought food and drink to share with colleagues. Our department ordered pizzas and hired an accordion player from the North End of Boston who took requests.

I don't remember much about the more expensive offsite parties, but the self-made, in-house party sticks with me more than a decade later. I haven't forgotten the accordion player, who didn't know Led Zeppelin's "Stairway to Heaven" (1971) and instead broke into the Gershwins' classic "I'll Build a Stairway to Paradise" (1922).

In other words, sometimes saving money actually produces a better result -- a heartening thought at a time when the economic troubles of the early 1990s seem quaint compared with what we face now. A party of any sort feels extravagant when you're facing the prospect of job cuts.

In March the heads of 13 medical departments at a Boston-area hospital each contributed roughly $27,000 from their salaries so that the hospital could avoid layoffs. That was a voluntary decision. At other companies, however, employees are being asked to consider taking salary cuts to avoid having co-workers laid off.

When faced with such a question, is it wrong for an employee to respond that he or she would prefer not to take the cut? And does it matter how other employees decide?

Some management experts believe that it's foolhardy to ask employees to stick around at a diminished salary and expect them to be motivated to perform at their highest level. Better, they say, to lose a few employees while allowing those who remain to be fully compensated to do their jobs.

It seems to me that seeing your co-workers begin to drop like flies can be equally demoralizing. Besides, who wants to be the guy who argues against making any sacrifice at all to keep jobs? "I'd hate to see you go, Lenny, but if it's between you and 1 percent of my salary, see ya."

There is no ethical obligation, however, for any employee to offer to take a pay cut or, given the choice, to agree to one if she doesn't want to. The right thing for each employee to do is to weigh all the factors involved in the choice: If I agree to take a pay cut, will it be difficult to meet my family's financial obligations? If I don't agree and others are laid off, will my additional workload diminish the time I have to spend with my family? And so on.

Of course, even if an employee doesn't agree, he has no assurance that across-the-board pay cuts won't be made anyway, leaving him with only the option to quit or not to quit. And, of course, if he turns down the pay cut, it's possible that it will be his job that is cut to make ends meet. There are no good options in this situation, and thus no easy choices. There is no ethical obligation to accept a pay cut for the benefit of others, however, and someone who refuses to do so isn't falling short ethically, even if others decide to accept the cut.


c.2009 The New York Times Syndicate (Distributed by The New York Times Syndicate)

2 comments:

Maddy said...

Mr Seglin,

You write the article as if the employee has a choice to accept the pay cut. From the instances I hear about, the only choice left to the employee is to find a new job as the pay cuts are mandatory across the board.

Also, you mentioned a one percent cut, but I'm hearing of 10 and 20 percent pay cuts. Many hourly employees are finding their hours cut which means not only do they get a decrease in salary but also an increase in workload.

I know of several acquaintances who are currently unemployed and unable to find work. It is disconcerting to realize these people are well educated or specialty trained and have previously never worried over the possibility of unemployment as their jobs were always in demand.

I don't have any answers. I just find it unsettling to see the cuts across the spectrum of the market and the range of fields, instead of in just a few areas.

The Coach's Wife said...

I'm the HR Manager for a non-profit human services agency. We're completely reliant upon the state for funding. Because the state's budget is suffering, we're also suffering. In addition to a wage freeze, loss of a sick day and holiday, suspension of company match to our 401(k) program, and reduced benefits with increased costs, we now have to endure a 3%, across-the-board pay cut. At my current salary, that amounts to about a 7% compensation loss.

Because of the population of individuals we serve, most of us aren't here for the paycheck anyway. That doesn't devalue one's need to earn enough to keep a roof over one's head or feed and clothe one's family. I can't speak for my employees or coworkers, but given the choice, I wouldn't have opted for a pay cut. I actually have trouble imagining that anyone would voluntarily agree to a pay cut to save someone else's job. Yes, that may be a cynical opinion, but it's a Darwinian kind of business climate out there. I suppose that's why companies and even government employers agreed to make cuts across the board - to save any one person from the pressures of voluntarily giving up money.

My CEO promises that we'll all be restored once the economy improves and our revenue is increased. I fear the employees in the for-profit sector whose CEOs will realize that they can pay people less money for more work and then neglect to restore bneefits and compensation to "pre-recession" levels.

Is employer responsible for expense if I might leave?

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