There are times when a company faces the difficult choice of cutting people or cutting pay. When a pay cut is sufficient, a company may consider wage cuts. But when you’re used to offering raises and bonuses for good performance, the idea of asking someone to accept less is daunting. Here are some tips.
An In Person Meeting is Best
Whenever possible, have this discussion in person. Prepare ahead of time a short document with the information presented simply. Stick to the facts. This is something you can hand to your employee so he can read it and have some time to digest the information you tell him.
Present the situation factually. Your employee has been a good employee. However, due to specific facts (like a shortage in demand), you are faced with hard choices. Rather than lay people off, you are asking all employees to take a __ percent reduction in pay. This is not meant to be a reflection on your employee, but rather a measure to keep employees on the payroll. Advise the employee that there will not be any changes to his current duties and position. While you hope to raise wages again, you will continue to monitor the company’s performance.
What Happens if He Says No?
Advise your employee that he can decline the offer of the wage reduction. If he does, his employment will be terminated. In that case, you may decide to offer severance pay or not, depending on your company’s financial capacity.
While asking employees to take a pay cut is difficult, it may be the key to allowing your company to turn around, again becoming profitable and offering growth opportunities to your employees.
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