With companies across the world announcing mass layoffs. Here is how it compares with Pay-cuts.
In Pay-Cuts, risk is distributed to all employees, as a result everybody loses a small part of their salary instead of losing 100%.
1) Pay-Cuts are more humane,
2) Post Lay-Offs, a company’s image is tarnished, a chuck of money is to be spent on PR, re-building public image, payment of severance money, & so-on.
Therefore, Pay-cuts may end up saving money for the company as against its counterpart lay-offs.
So, Pay-Cuts is the winner?
1) demotivate Employees,
2) tend to retain the worst employees, (best ones are already sitting on job offers)
An ailing company needs to get rid of non-productive employees to survive.
More so, it comes out that, Pay-cut may look good in the short run but are rather detrimental for the company later.
But is it all bad?
In places, where the whole industry/economy is facing a downturn, Pay-cuts may be good, given that there is job scarcity in the market (Raise salaries when situations reverse).
But, if it’s just your company going through a phase, Beware! Pay-cuts may lead other companies in the sector to poach your talent.
Therefore, it becomes all the more crucial for entrepreneurs to understand the economy & industry trends along with their own needs before taking such critical decisions!