Would you take a pay cut to keep your job?

By Stew

I like my current day job, however, our finances are so tight that if my boss asked me to take a pay cut, it might take me a while to make a decision. Here are some of my possible responses:

I might say “yes” because of our health insurance. Health insurance could be a big factor in this decision. If my family had immediate need of medical care, I might be forced to accept whatever pay I was offered.

I might say “no”, and quit the job – even in this job market. My reasoning is that if we are barely making ends meet now, doing the same work for less pay might make things worse. Keeping the job would most likely necessitate additional part-time employment anyway. Either way, I am looking for a new part-time job or a new full-time job. I personally believe that I would have a greater chance to increase my income simply pursuing another full-time job.

I might say “yes” and keep the job in exchange for fewer hours. If I only worked four days a week, I could focus on other ways to make money.

I might say “no” because a pay cut could be a tip-off of greater problems within the industry. If a company cannot fulfill its word to employees, that shows a possible slowing down of the market in that particular field or worse, it might indicate poor planning or management on the part of the company. Either way, you will probably be without a job soon whether or not you choose to take the salary reduction. You might be better jumping off and getting a jump on the job market.

I might say “yes” and continue to work, while sending out dozens of applications to human resource departments all over the place.

If you think your job is in danger, do everything possible to demonstrate your importance to your company. Innovate, work extra, suggest ideas, do anything that will show your boss that if he is going to be successful and the company is going to be successful, they need you at your post. Of course, I hope you are working hard, even if a layoff is not imminent.

Remember the parable of the “unjust steward” also sometimes referred to as the “wise manager” in the gospel of Luke chapter 16? His actions were not the most ethical – this is not permission to defraud an employer – the point is that the steward assessed his situation as quickly as possible and started to make plans for the future. He found a way to take care of himself even after losing his position.

No job is save in this the so-called “Great Recession”. We would all be wise to have a plan “B” in mind.

Would you take a pay cut to keep your job?

Article by Stew

Photo by aflcio

9 Responses (including trackbacks) to “Would you take a pay cut to keep your job?”

  1. prasti Says:

    my husband took a 5% pay cut last year, and it’s been a challenge to stay afloat. we had been working to pay off debt before the pay cut and that 5% less income has slowed us down. unfortunately, despite his pay cut, it didn’t mean less hours of work though it should have. we have 3 kids and like you mentioned above, he stayed on primarily b/c of the health insurance (but this year our premium went up and it feels like another pay cut :) ). he has been looking for other jobs (some within the company some outside of the company) with either comparable pay and less hours or more pay and same work hours.

    but the pay cut has been a blessing in that it’s forced us to rely more on the Lord’s providence and to re-examine how we live. and praise God, this year he will be getting a 2% raise. not back to what he was making but every little bit counts. :)

  2. Anon Says:

    My husband also took a 5% paycut last year. In fact the whole company did so that no one got laid off. He and I agreed that the paycut was way better than being laid off. Luckly, they just reinstated the 5%.

  3. Stew Says:

    Prasti – thanks for sharing your story. Dependence on God is a good thing.

    Anon – that is the best case scenario. Good company.

  4. castocreations Says:

    I would take a pay cut…then again I quit my job and start a new one in a couple of weeks. :) It’s 100% commission so a pay cut would just mean I wasn’t work hard enough.

    There are so many people looking for jobs that a pay cut would be a blessing if the other option was termination.

    My hubby has effectively had pay decreases as his health care costs have increased. We’re not complaining…we’re blessed and thankful for all that God provides. We just make due the best we can.

  5. Courtney Says:

    Your reasons for saying ‘no I’d quit’ don’t make any sense. My personal rule is ‘never quit a job unless you have something else lined up’ because you have no idea how long you will be out of work. I would definitely take the pay cut over quitting – 80-95% of your salary is better than 0%, and if you quit you can’t get unemployment benefits. The health insurance is also a biggie. But I would also start immediately looking for another job.

  6. Wayward Says:

    In my opinion, every employee is taking a pay cut every year a company decides not to give out raises. From that vantage, my fiancé has been taking a pay cut every year for the past 8 years; in addition to the 5% across-the-board pay reduction that went into place 18-or-so months ago. I took a pay cut last year when my company was in a difficult patch and froze raises. I’m also taking a pay cut in my future earnings as my company froze all company 401k contributions at the same time and has not reinstated them (though raises, for me, are back in place this calendar year).

    If you’re laid-off because you choose not to accept a pay cut, you’re not eligible for most unemployment benefits because the job is technically still available to you. Same goes for not choosing to take a relocation option. IMO, the best thing to do is to take the cut (obviously, since that’s what we’ve done) and if you truly cannot make the budget work and you’re ready to move on, job-hunt while you’re still working—at least you’ll have an incoming paycheck while you look. Thankfully, I love my job (though the fiancé hates his) and we have been able to make our household budget work.

    We’ve both secured telecommuting options on our positions and are currently exploring moving to an area with a lower cost of living to help ease the strain on the budget.

  7. Marsha Says:

    As a California State Employee, we have taken pay cuts with the furloughs. But I work for a very small agency that is just a drop in the bucket for the overall state budget. We are like family here and over the past several years we have all chosen to take voluntary leave without pay to keep from letting anyone go. People have chosen to leave for other jobs and stuff but we have all volunteered pay cuts to not only keep out own jobs but to help others keep theirs too. Despite what the wall street journal and common opinion may be, the bulk of ca. state employees are not going skiing on furlough fridays and enjoying discounted sushi as a perk. I have multiple friends that have been pushed into foreclosure and bankruptcy because of surprises in life coupled with the reduction in pay. I don’t know a single one who has opted for “no job” as opposed to a lower paying job. These are rough times right now.

    Personally, the lower pay has humbled me immensely. My family and I have learned to go with the flow and just do our very best. At the end of the day, that is all anyone can really expect from us. Thank you for your post! It is an issue so present in my life and in the lives of so many loved ones.

  8. Christine Says:

    My husband has been through two cuts, the first 4 hours in 2008, and the second the next 4 in August, so he has worked 4 days a week for almost two years now.
    However, if they have work, the will call him in, so our budget is slightly flexible. It was very hard at first (I’m a stay at home homeschooling mom,) but we’ve adjusted and God has protected us.
    I also would not quit unless I had another job lined up.

  9. Jonathan@Friends and Money Says:

    My heart says yes, but the truth is that I wouldn’t. Sometimes employers use this trick as a means of driving down costs. If I’m central to the organisation then I deserve to be paid what I’m worth. If not then I’ll look elsewhere.