Is It Better to Sack People… Or Cut Everyone’s Pay?
By Anna Johnson on March 6th, 2009We all know of companies laying off staff. Fortune 500 companies. ‘Mom and pop’ or ‘mum and dad’ businesses. Tech startups and even major Internet marketing companies such as Google, Yahoo and numerous others.
If they’re not laying off staff, they’re cutting bonuses, reducing people’s working hours or lowering pay. But is it really better to, say, cut everyone’s pay rather than sack some staff?
I’ve generally held the view that it’s better to take whatever measures you can to keep everyone on the payroll. To eliminate bonuses, reduce people’s hours, or even lower everyone’s pay, rather than let some people go altogether.
But something Jason Calacanis said in his recent article has inspired me to rethink this viewpoint. Jason said:
“I’m really against cutting people’s pay above cutting position because you want the people remaining in your organization to be happy.”
Jason suggests that if you keep everyone on, whilst reducing their employment benefits, the entire workforce will be less motivated. If, on the other hand, you cut some positions but don’t reduce the benefits of the remaining staff, then you’ll at least be left with motivated staff.
My view was based on more of a ‘community’ mentality – the idea that we all make some sacrifices for the benefit of everyone. But Jason has made me question whether this view is realistic.
I’ve never actually been in a company that’s made layoffs, and I’ve never had to make them myself, so maybe my view is based on a idealistic perspective of the world.
So the question remains: is it better to sack people, or cut everyone’s pay? Or does it depend on the circumstances, and the company and people in question?
March 8th, 2009 at 1:52 pm
Which is better really depend on the circumstances such as the size of the companies, the volume of the people involved, how bad the company is affected and above all is the ultimate intention of the company in dealing with the recession. Also, if cutting expenses if preferrable then there are definitely various methods in executing it. For instance, it can be by cutting monthly salary for perhaps different percentage applicable for different salary or reducing working hours or cutting partime vacancies or to encourage more partime vacancies (in order to reduce some companies\’ benefits) or maybe to cut some companies\’ benefits like no more company trip or etc.