Your Virtual Financial Advisors On How To Handle A Pay Cut

First things first: Pay cuts are legal as long as they’re not done in a discriminatory way. So, your virtual financial advisors want you to know that if a pay cut isn’t based on an employee’s race, gender or age, then a corporation can reduce their salary as long as it’s at least minimum wage.

Taking a pay cut in the future is certainly not what employees expect when accepting a job offer. But if your employer is having financial difficulty, they may choose to reduce payroll versus terminating positions. It’s important you first digest and process the news, especially if you didn’t see it coming.

Back in the 2007-2008 Recession in the country, nearly 9 million American workers lost their jobs. Unemployment in the U.S. reached 10% in late 2019. Nevada, California and Michigan had some of the highest jobless rates. Aside from unemployment, pay cuts were also common, especially at the very beginning when employers were still trying to hold on and weather the storm so to speak.

So where do you start after hearing the news? Information is key. Your virtual financial advisors suggest fully understanding the big picture. The why, the when and all of the questions in between. You want to ask if this pay cut is a one-time situation or there’s more to come later on. You want to know if it will affect your benefits or 401(K) match.

Will your salary go back to its original amount, once the financial hardship dissipates? Ask about company’s long-term plan strategy and so on. The more you know, the more of an informed decision you can make.

Negotiating skills can come in handing during this type of tough situation. Just for a little context, here’s some research that can shed light on the power of benefits. A study of 2,000 Americans asked them to choose between two opposite situations: Enjoy a job you love, but half your current pay OR a job you hate, with twice your current pay. 3 in 5 Americans said they’d take a 50% pay cut for a job they loved. This brings us to one of the ways for how you can handle a pay cut.

Your virtual financial advisors suggest you negotiate

Your virtual financial advisors suggest you negotiate your heart out. Since your salary will be compromised, ask for benefits to make up for it. Think extra weeks off, more vacation days, retention bonus, working from home for a few days a week, having a four-day work week, and the like.

You can even take it further and try to get gym memberships or wellness programs paid for, tuition reimbursements, or maybe there’s an out-of-town trade conference you’d like to attend or a workshop that the company can pay for. According to the same study referred to above, nearly 70% of Americans value benefits and company culture over salary. So negotiating better benefits may really work out in the end, and your pay cut wouldn’t seem like such a big deal.

Being faced with a pay cut may also give you the opportunity to leave your current job. You may not have been too happy with work lately, maybe feeling unchallenged or just in need of something new. In most cases, employers notify about looming pay cuts in advance giving workers time to think about what they want to do next. So another way to handle a pay cut is really think about where you see yourself next. Do you need some time off? Do you want to change careers altogether? Perhaps go back to school or spend quality time with elderly parents?

A pay cut gives you the chance to do just that. Your virtual financial advisors recommend you stay positive and believe you’ll bounce back. A pay cut doesn’t have to spell out doom and gloom. Should you choose to jump ship so to speak, use that time to freelance, act as a consultant, work part-time or do something that’s beneficial to your wellbeing. A little time off from your routine can do you some good.