"Industry Standard" Paycuts in IT? 1144
noGarnishMe! asks: "I was just reading about a Chicago-based company that has told all its employees earning over $60K/year that they will have to accept a 50% percent paycut for the month of May. This cut might be necessary in these times but keep in mind that the bozos in senior management just finished buying up several failing companies and paying some large bonuses to themselves. The memo announcing the cut is here. This cut, coming in such large chunk and in May, seems like a draconian shot to boost the 2d quarter financials. True, the annual paycut of 3.8% is modest but it ignores that fact that many folks won't be able to pay their May bills with only half their salary. I know that many of us have been through rough times these past 18 months and so I ask, what has been the approach at your company?" There are graceful and non-graceful ways for a company to handle a lack of cash flow. In the scramble for survival, especially in an economic downturn, many companies are caught off-guard and have to show their shareholders that they are doing something to get the company back on the road to profitability (which seems to be the issue, here). In many of these cases, the group most affected by such changes are the employees. It would be interesting to note how many of you have gone through this before and what you had to do to survive the shortfall.
Re:Don't accept the cut (Score:5, Informative)
Um... shouldn't that read, "If you have a contract they can't change at will"? A fair share of employees these days are precisely "employees at will," with no obligation on either party aside from payment for services rendered. This is the way I've always worked.
This is actually kind of the problem with employment at will: management can hand down whatever terms they want, and it's their way or the highway. This is justified with deference to "the market," on the theory that if conditions get bad enough, you can just go work somewhere else. But a lot of times that's impossible or very difficult in practice; if they have you working long hours for low pay, you have very little time or resources to seek another job.
I'd prefer that I had a set contract for most of the jobs I've had, but that's not the way it's worked.
I work there NOW (Score:1, Informative)
We get paid every two weeks. They're jacking 1/2 of the third paycheck in may and 1/2 of the first paycheck in June. That way - at least on paper - it's not so bad for people who have monthly payments (i.e mortgage) as effectivly you get two paychecks in each of May and June.
To respond to some other comments, it's EVERYONE over 60K, managers & sales included. It's also only US for now - as a poster alluded to this kind of thing doesn't fly so well in other countries.
Re:RETROACTIVE paycut?! (Score:3, Informative)
Illinois Labor Board is located at
http://www2.state.il.us/ilrb/index.asp
Look in a mirror (Score:2, Informative)
Salary, alone, is meaningless. What's critically important is the balance of salary to expenses. Sure our salaries may be higher than the national average, but we also largely live in a handful of urban areas where rents/mortgages and other major expenses can be astronomical.
It's easy to say that a salary of $75k and a monthly rent of $1500 is equivalent to a salary of $25k and a monthly rent of $500 somewhere in middle America, but that overlooks one key fact: taxes. The person earning $25k will pay FICA, but not much in state and federal taxes. The person earning $75k will pay a huge chuck of it in taxes. ($15k, perhaps?) You can't really itemize until you have a mortgage interest, but in these urban areas that income won't get you much, if anything at all.
I agree that it's critical that people have a sizeable cash buffer, but I don't know anyone who was able to do so until after they had bought real estate and then it wasn't until about 5 years later. The problem is that the same cash buffer, before you own property, is best used to buy real estate and lock in your largest fixed expense and get that tax benefit.
Re:Look in a mirror (Score:2, Informative)
Re:hmmmm (Score:2, Informative)
But I just bit the bullet and made it happen. I started off with something as fundamental as calling all the credit card companies and renegotiating the interest rate. Then I started putting what I could into savings (started off at $200/mo)...It slowly built up, as I paid off debt.
All told, it took me 2-3 years to get out of credit card debt. Now I'm taking the money I used to pay towards CC's and applying it to paying off the student loans more quickly.
Lots of resources out there to help one figure out how to squeeze more cash out of one's paycheck. Biggest thing that helped me was setting up multiple direct deposits, so that I paid money into my savings as well as checking...If I couldn't see it, I couldn't spend it.
I'm a DINK, and I still have to remind myself how to save every day. I read a lot of sites & boards about it, pack a lunch regularly, and try not to impulse buy.
late paychecks (Score:3, Informative)
Re:hmmmm (Score:3, Informative)
It is not hard to figure out the "money" thing.
Maybe so. But you'd be surprised at just how insufficiently educated most people are about personal finance.
Many people learn from their parents, who, chances are, are among the 90% of the population that are debtors rather than creditors.
It's kind of like parenting skills. It only takes half a brain and some willingness to invest some effort in learning how to be a parent in order to be a good one, but most people just "wing it" and tend to pass on a comparable ratio of personal dysfunctional habits to their children.
You just didn't WANT to.
More like, they just didn't think it was important to learn how to properly manage personal finances.
Well, it's important.
It's a hard lesson to learn by way of severe salaray reduction, but it will be good lesson.
Apart from the necessity of saving 3-6 months salary as an emergency contingency fund, they'll probably also start paying attention to a few other basics, such as not paying credit card interest, saving for kid's college, and really saving heavily for retirement because actual social security benefits are going to be paltry.
Re:hmmmm (Score:2, Informative)
Go read the notice. Go do the math.
Earn $60k and they're going to cut two of your semimonthly paychecks in half. That equates to 23 pay periods instead of 24.
60000/24*23 = 57500
There, the math's been done for you. Now go read the artcile again.
Re:Same boat, captain. (Score:3, Informative)
Re:hmmmm (Score:2, Informative)
Couple of places I'd recommend looking at -
http://www.clarkhoward.com - Consumer advocate, good financial advice site.
http://www.fool.com - financial advice, their articles are free, their boards are subscription based.
The Place I used to work (Score:2, Informative)
Re:hmmmm (Score:2, Informative)
Re:Same boat, captain. (Score:1, Informative)
My advice is to talk to a lawyer. Paying you a month behind schedule is not acceptable.
Re:America is a strange country....but a good one. (Score:2, Informative)
Its very difficult to tell the average laborer of any nation that less job protections, after job protections have reached a human level of course and they are human in the US, are better for them than more protections. Companies and thus the industries they make up need to be flexible and nimble in response to changing economic conditions. When the economy slows down, companies need to trim their budges and the usual way to do that is to layoff people. There's nothing sinful about it. What would be sinful would be to keep them employed even when they aren't needed at the expense of the future health of the company. Its a matter of do you want 5%-60% of a company laid off or 100%? If you restrict the firing practices of corporations you end up with less overall economic activity and much higher rates of unemployment. Even during the lightning quick recession over here unemployment was very low and as of March 2002 its at 5.7 percent nationwide. Frankly as an American I just don't understand how Europeans can tolerate so many individuals being out of work and making the situation even worse by giving unions so much power and writing very silly anti-business laws such as the 35 hour workweek in France.
Oh and the fact that in the US most people are employed "at-will" meaning a company can fire you when it needs/wants to as long as its not discriminatory.
BRAVO! (Score:2, Informative)
Lee Iococca worked for ONE DOLLAR during Chrysler's financial crisis. Forgoing a couple million dollars in salary isn't going to save a humongus corporation, but it does serve as an inspiring example when you are forced to ask your employees to make sacrifices. Of course, most CEO's never served in the Armed Services (many of them played the system during the draft in ways that would make you wish you never talked about Bill Clinton going to Oxford), so they wouldn't know anything about leading by example.