Business Brains

Survey: Salary cuts on the rise as an alternative to the layoff route

Posting in Technology

Like most of you, I've been on pretty much every side of a layoff: The planning end, the delivery end, the surviving end and (ultimately) the receivin...

Like most of you, I've been on pretty much every side of a layoff: The planning end, the delivery end, the surviving end and (ultimately) the receiving end. With no disrespect to anyone who has been "idled" in the past few months, I preferred the receiving end to all of the other parts of the process. At least I had some control over my destiny from that point onward.

I bring this up because outplacement firm Challenger, Gray & Christmas has just released a survey that shows more companies are postponing layoffs as they seek to stablize their costs during this recession. Instead, they are looking at salary reductions either selectively or across-the-board (remember what Hewlett-Packard did?) Since January, the firm reports, the number of employers that have either cut or frozen wages has almost doubled.

Here are the stats from the survey:

  • In January 2009, 52.4 percent of the human resources execs responding to the Challenger, Gray survey said their companies had adopted wage freezes or salary cuts. That was up from 27.2 percent of the respondents in the January 2008 survey.
  • At the same time, the number of HR execs reporting job cuts fell to 43 percent in the January 2009 survey, compared with 56 percent in the year-earlier poll.
  • 86 percent of the execs said they had adopted some sort of cost-cutting measures in January 2009. That was actually down from 92 percent in the year-earlier data.
  • More execs said their company had also taken one of the following work-related actions to hold down expenses in the recession: cuts in work hours, an elimination or reduction of tuition reimbursement, involuntarily furlough programs (Cisco, as an example, mandated a week off between Christmas and New Year's last December), and temporary layoffs. (As opposed to "layoffs" that are really permanent reductions in force.)

In its analysis of these results, Challenger notes that it's easier to manage temporary wage freezes or salary cuts than it is to manage the impact of fewer employees to handle the same workload. Take it from me, there is nothing worse on someone's morale than eliminating great contributors AND THEN asking those who remain to pick up even more work. I know, we're all supposed to be grateful that we still HAVE a job, but there's a certain point at which that just becomes a lame excuse for asking way more of people than we have any right to do. It's just counterproductive.

The cynical part of me is guessing that the unbelievable federal benefits that people now receive as a result of being laid off probably have something to do with the shift toward keeping people on board, but adjusting their compensation. My guess is that those federal benefits are putting an extra burden on companies, one that I haven't seen written about to date.

Either way, a smart strategy right now, especially as things look brighter for later this year, is to hang onto your best people any way you can. I'm betting you'll need every mind, hand and project participant you can get coming later this year, and it sure is less expensive to increase the compensation for existing workers than it is to go out and rehire new ones.

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Heather Clancy

Section Editor

Heather Clancy has written for United Press International, ZDNet, Entrepreneur, Fortune Small Business, the International Herald Tribune and the New York Times. She holds a degree from McGill University. She is based in New Jersey. Follow her on Twitter. Disclosure