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04/26/09
Pay (Cut) Negotiations
Filed under: Salary, Career, Negotiation
Posted by: John Hadley @ 10:33 pm

“I am working for a recruiting firm, and have been told that I can stay if I accept a 40% cut in pay until business picks up.  A bucket of ice water in the face does not adequately describe my initial thoughts. I am at a crossroads as unemployment would be more for me after taxes, but I have great insurance with the company that I could not get w/out.

Any advice? I would imagine there are more questions, please hit me with them! Need an outside perspective on this.”

This is a very tough situation – I would have described it more like a sucker punch in the gut than ice water in the face!

You should think carefully about options, longer term goals, etc, and be careful not to simply act out of the stress of the moment. Possibilities that occur to me off the top of my head include:

  • Figuring out a quid pro quo for the 40% pay cut, such as guaranteed employment for 1 year, benchmarks for production that when achieved will trigger an automatic bump back up to the prior salary, a substantial increase in paid time off (which you could use to seek other employment, though you wouldn’t tell them that), variable comp based on increasing your accounts above their current level (so that you can ‘earn’ your way back to your current pay)…
  • Negotiating with them on the size of the decrease (and coupled with any of the above). Get really clear on the results you have brought to their operation and expect to bring going forward for that discussion, and make that front and center in the meeting.
  • You could even try to negotiate a move back to contractor status at the pre-cut pay with a variable bonus based on production above a certain level, which would leave you with a smaller cut after paying for the insurance costs you lose, and would give them the benefit of moving you out of a fixed long term cost.
  • Seeking a new job while continuing to work with them at the lower pay.
  • Negotiating a severance package of some sort, and then going to look for a new job full time.
  • In preparation for the discussion, also try to examine how much they would be hurt if you walked away. What would that possibly cost them in terms of the remaining accounts, relationships, and the need to pay someone else to take on what you’ve been doing?

    If you have a strong relationship with those accounts, what could you do to sell the benefits of your services to them, either as part of the recruiting firm, as an employee with them, as an independent contractor (lower cost), or with another firm? (Obviously, any non-compete agreements with your current boss will affect your options … and if you have those, then part of the quid pro quo negotiation to accept any pay cut should include limiting or eliminating such restrictions until the point they bump your pay back up.)

    Finally, think about:

  • Do you really like the job, the company, your boss, etc.?
  • Does this pay cut affect how you feel about those elements?
  • What does it say about what else they might do in the future?
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