Six ways bosses can cut your pay – and what to do about it

Rich Pedroncelli/AP
State employee Diane Greagor joined hundreds of other state employees and supporters early in July in Sacramento, Calif., to demonstrate against Gov. Arnold Schwarzenegger's proposed budget cuts to state employee pay and other state services in Sacramento, Calif.

Did you survive the massive layoffs of 2008 and early 2009? Congratulations. Now, watch out for the pay cut.

It probably won't come as a direct salary or wage reduction. Managers know that's demoralizing. So they're finding other, more creative ways to trim. Here are six to watch out for:

1) Delay the start date. Some law firms are waiting months before bringing their new hires onboard and, in some cases, lowering starting salaries, the Federal Reserve Bank of Dallas reported in its survey of business conditions released Wednesday.

2) Raise the pay, lower the benefits. The Federal Reserve Bank of Boston said while two-thirds of the companies it surveyed had raised worker pay this year, some had also cut benefits or announced delays in future raises.

3) Cut the retirement plan. Media General, owner of the Richmond (Va.) Times-Dispatch and other newspapers, announced in January that it would stop matching employee contributions to their 401(k) retirement plans at least through the end of the year. It joins more than 260 US companies that have announced plans to change or suspend matching contributions, according to the Pension Rights Center.

4) Slash the hours. Hardinge, a machine toolmaker in Elmira, N.Y., could have laid off 20 people but instead chose to cut the work week for most of its workers to four days. It's an increasingly common technique that private employers and, especially, state and local governments, are using to save money while holding on to their workers. The mandatory furlough – say, a week off with no pay – is a variation on this.

5) Lease the workers. It's not just US companies facing recession pressures. British telecommunications giant BT is encouraging its work force to work elsewhere temporarily. (I'm not making this up.) In the past, BT let its employees work for government agencies and charities (who picked up the tab). Now, it's urging them to work for other private companies. Not direct competitors, a spokesman told the Daily Mail last month, but those in "like-minded industries."

6) Make 'em part-timers. BT, again. Full-time workers get a £1,000 bonus ($1,650) if they switch to part-time status. There's a perk for parents: They can take all of summer vacation off to spend with their children.

These strategies are emerging now because many corporations have already engineered massive layoffs and don't want to have too few workers when the economy rebounds.

"Companies have recognized they don't want to cut any more of their workers," says Steve Gross, global rewards consulting leader at Mercer consulting firm, in a telephone interview. But a recovery is too distant for managers to tough it out without cost cuts, so they're looking for ways to trim compensation, he adds.

Worldwide wage pressure

It's a global phenomenon. Compared with the previous six months, fewer companies are planning layoffs through the end of the year, according to Mercer, which surveyed in May more than 2,100 employers operating in over 90 countries. But moves to cut employee compensation are on the rise, Mercer's data show (click on chart above).

Although companies all over the world are trimming compensation, the trends are most acute in the United States, according to the survey. For example: Six in 10 US companies reported that they had trimmed 2009 bonuses. Some 18 percent planned to ask their employees to work fewer hours or take a pay cut in the following six months, up from 11 percent in the previous six months; 15 percent planned to use more temporary or part-time workers, up from 13 percent.

Some firms are also cutting pay directly, but it's not a popular option. "Very few companies, it's still in single digits, actually cut wages," Mr. Gross says.

A first for white-collar Americans

Many hourly workers, especially those in hard-hit manufacturing industries or the airlines, have battled such compensation cuts on and off for the past three decades. They often had contracts and unions to help limit the givebacks. Many European and Latin American nations have worker-protection laws that limit what employers can do. But salaried American workers in white-collar industries, many of whom have never faced such Depression-era moves, are largely unprotected and on their own.

So what can you do in the face of a benefit trim or salary cut?

If your employer has cut your hours because business has dried up, that's not necessarily a bad sign. Your hours may well increase once business picks up, Gross says. If she cuts your salary, that's a signal that that pay may not necessarily come back once things improve.

"When your supervisor breaks the news to you about your pay cut, do not accept anything immediately," writes Caroline Potter for Yahoo! HotJobs. "What you want to do is buy yourself some time. Why? You need to find out all the facts surrounding a salary reduction before you accept it."

A tough assessment

Take a hard look at your company and industry, decide whether it's better to stay or leave, and then negotiate with your current boss – or look for another job.

When you're ready, ask your manager how long it will last, what impact it might have on other benefits, and whether its being applied across the board, writes Paul Barada, a salary and negotiation expert at

Eventually, you may be able to ask to recoup your lost pay, writes Tara Weiss of But come prepared with examples to show your manager why you deserve it.

These days, nothing in the workplace is guaranteed.
– Nothing, that is, except a Twitter feed from us.

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