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%.
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Hence,
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.
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Therefore, Pay-cuts may end up saving money for the company as against its counterpart lay-offs.
So, Pay-Cuts is the winner?
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Well, Pay-Cuts:
1) demotivate Employees,
2) tend to retain the worst employees, (best ones are already sitting on job offers)
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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).
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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!
