How to Handle Salary Reductions...a Difficult Discussions Guide

Updated: Jul 20


In the past week alone, I've spoken to four people who have asked for advice on how to handle one of the most difficult workplace conversations: salary reductions.

Given one of the impacts of COVID-19 is that these discussions are occurring more frequently, I've put together a guide on how to handle salary reduction discussions - for individuals and managers.


3 Tips for Individuals


1. MAINTAIN A SENSE OF PERSPECTIVE


It could be a lot worse.


There are millions of people losing their jobs right now. Being asked to accept a temporary salary cut is a relatively small sacrifice to make. Keep in mind that the company doesn't want to do this either - it is painful for everyone involved.

2. DON'T LET YOUR EMOTIONS DRIVE YOUR RESPONSE


Give yourself the time you need.


If you feel upset, ask for time to review the proposal and avoid saying things in the heat of the moment that you can't take back. Ask objective questions, such as whether is it a salary deferral or temporary reduction, what are the triggers or timelines for reviews and reinstatements, are there trade-offs and incentives for accepting a lower salary, etc. Be constructive and unemotional.

3. SPEAK FOR YOURSELF


Don’t appoint yourself team spokesperson.


The de facto employees' representative can't win - they either let the team down or annoy management. If you want to resist, because you have the leverage to do so or because you're willing to leave, speak for yourself and consider the consequences. Now may not be the best time to be looking for work, but since companies want to reduce cost, you could actually negotiate a better exit package

I remember accepting a 10% pay cut during the Global Financial Crisis, and it was hard not to take it personally.

3 Tips for Managers


1. BE TRANSPARENT AND PROVIDE CONTEXT


Over-communicate.


Explain how COVID-19 is impacting the company, or is forecast to. Share information about how the firm is dealing with it (e.g. seniors taking larger salary cuts, other cost cutting measures). Discuss how the individual's sacrifice helps the business continue to function and is intended to avoid deeper future cuts.

2. GIVE PEOPLE TIME TO DIGEST THE PROPOSAL


Time heals all wounds.


If you have a proper communication plan in place, employees should see this coming. Nevertheless, deliver the news about the salary reduction and then set up another time (e.g. 48 hours later) to gain their feedback and agreement; give people time to process the information.

3. AVOID MAKING PROMISES YOU CAN’T KEEP


Don’t set a trap for yourself.


Stick to the script. Avoid committing to reinstatement of salaries by a certain date or saying that it is the only measure the company will take if you can't keep that promise. The uncertainty means you shouldn't make promises that could ruin your credibility. If alternatives exist (e.g. redundancies, reduced hours), put them on the table so people who resist pay reductions understand their options.

As with all conversations in the workplace, it’s important to be prepared and be professional.

If you found this guide useful and think it could help others, please share it with your network.






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