Have You Ever Taken a Salary Cut?

Here are four interesting stories of people who took salary cuts and how they managed through it. Which leads me to ask all of you the following:

Have you ever taken a salary cut? What were the circumstances? How did you cope/adjust?

Fortunately, I have never had to take a salary cut. As I've moved from job to job, I've always been able to grow my salary (as well as my overall compensation.)

That said, I was part of a company that had pay freezes for two years. The business was not doing well (as you can imagine) and in addition to a hiring freeze, no one got pay increases. I was highly compensated so it impacted me less than others (and I have a big cushion between pay and spending anyway), but it was discouraging knowing that you're doing the same job with less staff (when someone left, they weren't replaced) and earning the same amount of money. Eventually, I left the company and moved on with my career.

How about you? Have you ever taken a salary cut?

Comments

[Matt]

Yes. 2008 and 2009 were 3% and 4%. Add in the days off with pay it worked out to be 17% and 19%. This year has been back at full salary and no days off without pay. I am glad I still have a job.

We live below our means so this did not impact our life style much. We just did not save that amount.

All said the extra time off with the family was a nice bonus and blessing.

[JP]

I had a contract-to-hire gig; when it was time to hire in the offer came in below my current contract rate. I walked out of my boss' office and started looking for a new job. Offer in hand from another company within a week with a 10%+ raise.

[Roy]

In 2008 I took a 50% pay cut as our company went from 700 employees down to 20 and I went from managing 30 employees to none. The company went through bankruptcy and is reopened with about 300 employees. My pay is about 70% of peak. I road it out because of my age and poor job market. The only financial issue is I wasn't able to save and give as much as before. I was saving 50-60% before and now I can only save about 25-30% of my income. This will probably delay my retirement by at least two years.

[mdb]

I have taken a pay cut twice. Once the company was going through a rough time (2001 recession) and the other was to switch jobs - it was a consulting job that came with a significant pay increase since it involved a lot of travel. The first cut wasn't bad, I forget the % - maybe 5, but I never really noticed it. The second cut was significant, but I was still better off than the previous job and I didn't increase my expenditures during the consulting, so going back was easy.

[Rich Schmidt]

I took a pretty significant pay cut one year, but it was my choice. We wanted to hire another full-time staff member at the church, and I asked the board to allow me to take a cut to free up the funds. They didn't like it, but they agreed to it. At the end of the year, that board was glad to reinstate my previous salary.

[Old Limey]

From November 1951 when I became an engineering apprentice at a British aircraft company until September 1992 when I retired as a staff engineer in the missile systems division of America's largest aerospace company I received raises every single year. I also have never had a single day of being unemployed, I went straight from one job into the next one and have only ever worked for four employers, one in England, one in Canada, and two in the USA. I also have never had a job application rejected.

Another anachronism is that I never had to pay any tuition, including my final qualification which was an MS degree in engineering mechanics from the oldest university in California - employers took care of that.

Those were the "Good Old Days" as far as I am concerned.

[Brian]

Took a pay cut of around 3% at the middle of 2011. Pay cuts across the board on a sliding scale with upper management taking around 15% cut. after six months the worst of it was over, and the company is now paying back the pay cut over the next six months. All in all it worked out, the cut wasn't so massive to impact my day to day, and still happy to work here.

[Danielle]

In more ways than one. My husband was laid off in 2008, took 6 months to find a job, but was able to find one in June of 2009, for a little over half of what he had been making. The kicker was the insurance benefits were awful, so my daughter and I got an individual health policies, which cut my paycheck drastically as well (my work doesn't offer health benefits). Although we had made decisions (vehicles, house, etc.) based on current income at the time, there was still plenty of room in the budget for the fun stuff. Those were cut immediately - cable, entertainment, eating out, etc. It's still a little tough, but we are making it. Knowing that the cuts we made have enabled us to stay out of debt while continuing to stay in our house near friends, take trips to see family, etc., make it worth it!

[Bethany]

My husband effectively took a salary cut this year, although technically speaking he went from contract to salary. He chose to do so because of better job security and better job fulfillment, as well as stock options (in a promising start-up). Like others who've commented, we haven't missed the money, and actually are enjoying the peace of mind and ease of budgeting that comes with a regular income.

[Lorena]

I took a pay cut when the public university I work at instituted furloughs one fiscal year (2009-10). It was sort of by choice, at least if you voted for it in the union election (it was overwhelmingly approved by union members considering the system's dire straits that year).

However, I mitigated that by making some extra money teaching a lab course at the same university (no commute since it was the middle of my workday; I just made the hours up by staying at my staff job longer) and freelance work on my furlough days. I also worked on my graduate degree at this time, which I didn't have to pay for as it is/was an employee benefit. I've since completed my degree.

So, the extra time off because of furloughs gave me time to explore other interests and enhance my resume, and the effect on my income was minimal.

[Lindsey]

Yes, and it was totally worth it. Of course, it wasn't much since I moved from my first job (started as a temp in a less-than-ideal job), to my second job, which is on the path to my dream job. I cut hours rather than hourly pay, but recently increased both hours & pay rate. The real benefit was that I left all my stress behind & now have a pleasant job that I truly enjoy, even when it does get stressful.
Of course, being 22 year old DINKs and having a very frugal lifestyle meant that we didn't even notice the change in income. And then a year later we bought an investment property & improved it with a very, very small mortgage to assist with the purchase...all improvements have been made out of pocket. So the pay cut didn't bother us.

[LotharBot]

My wife left her cushy job as a software engineer at Boeing to do freelance work. She prefers the lifestyle of a freelancer.

It helped that we lived way, way below our means before, and have decades of expenses saved up. This meant we could make the transition (and work through a health issue at the same time) without any particular difficulty.

[Emily]

I never had to take a cut when I was working for someone else, but if I had stayed there instead of getting pregnant and leaving, I would have received at least a pay cut, if not been laid off.

[JimL]

I have been very fortunate in my career as I have made several moves that have put me at a very senior level within my industry (with a corresponding compensation program). Two years ago, I was working for a company that was acquired by a large firm. As typical in these deals, there was a push by the acquiring company to lower expenses. They asked me to take a cut of approximately $60k between base and bonus as well as some concessions on benefits. When the deal was initially announced, I was approached by other companies, VC's, etc, to help them with their businesses. Given that leverage, I was able to not only push back, but ended up with an even better compensation package. They came to the realization that they could see their investment in the business could go down the drain if they did not retain those that built the business to begin with.

I have always kept my options open and continue to build my network as you never know when a company will decide your fate for you.

[Kathryn C]

yes, took a big pay cut when I lived in NY! I 1 step back then about 5 steps forward within a few years. Sometimes you've gotta do it, if it's a good role and there is good upside in the near term. It's no different than people who start their own businesses and don't draw a salary for a few years, but the upside (they believe) is so great that they don't care.

[Bad_Brad]

I was once a Financial Analyst for a major airline. Jesus, what the hell was I thinking working for an airline? I guess I was in my 20's and had no kids so the flight benefits were attractive.

Anyway, I was given no raise for two consecutive years and asked to take "voluntary" paycuts each year (if you define voluntary as your boss approaches you and tells you that you had "better f*cking take one for the team like everyone else"). So I "voluntarily" took 5% each year. The next year, when we almost went bankrupt (and I worked round the clock to negotiate with our Unions to renegotiate their contracts to avoid bankruptcy) I took a mandatory 20% paycut. Plus a benefit cut plus my pension was frozen and replaced with nothing. Then it was announced that the top executives of the company had arranged for the BOD to approve 7-figure "retention bonuses" for all of them in the event of a bankruptcy filing. So much for shared sacrifice and taking one for the team.

That company and its leaders were so corrupt it's mind-boggling. I'm glad I got out. I regret that I gave that company five years of my 20's.

[MC]

I took a pay cut when I started grad school in 1985.

I went from making $18K/year as a lab technologist to making a stipend of $10K/year (but it was tax-free!) for the 5 years I was in school for my PhD (tuition was also waived--typical for a science PhD program). It was a bit thin to live on, but OK. I didn't have a car, I rented a studio apartment in a "colorful" part of town for $280/mo with all utilities included, and I cooked cheap food at home and only shopped at thrift stores. When I finished I instantly started a postdoctoral fellowship at $25K/year which seemed ridiculously high paying! Since that time (20 years ago), I've been employed continuously and my pay has only gone up (once it actually doubled when I switched to a new position).

[First Step]

My husband took a 10% pay cut in 2009-2010. Other employees worked 36 hours per week for the cut, but my husband still had to work 40+ hours/week as the manager. He got his 10% back a little sooner than the other employees when his firm acquired another company and he had to travel extensively to conduct due diligence. A couple of months after getting full salary back, he received a raise, and he got a bonus at the end of 2010. This spring he received a profit-sharing bonus (never received before, even during better times) so I think it was worth it to hang in instead of trying to move to another job.

[Russell]

I took a pay cut when I started a new job recently after being laid off in January. The position is a management position, which is a promotion from where I was before. Previously, I was working as a senior analyst at a private consulting firm. My new position is with a city, which has a lower standard of living. However, benefits at the city almost make up the difference and the opportunity and experience I gain here will definitely pay off down the road. All in all, it is a good place to work, and when the alternative is unemployment, it is a no-brainer.

[retirebyforty]

Our company has a bonus system. On good years, we'll get good bonus. On bad years, the bonus could be cut in half or eliminate completely. The regular paycheck is a bit below average, but overall pay is pretty good with the bonus. This give the company a lot of flexibility during down time. So yes, I have taken a pay cut.

[Maggie@SquarePennies]

Yes. When I got married & moved to another part of the country. I had been a full time teacher for 7 years, but after the move I was only able to do substitute teaching. I put up with that thinking I would eventually be hired full-time. After 7 years of subbing I came to realize I would not be hired full-time. That's when I quit subbing because we were actually losing money on it. I'd come home so tired that we'd have to go out to eat. That cost more than I made that day. A lose-lose-lose proposition as I developed cancer from the stress of subbing for so long. At least that's what I think. The school board meetings were televised & I heard the board members say that they only wanted to hire recent grads to keep health care costs down. They also hired their own graduates first. So I was out on both counts. Sometimes you just have to stop beating your head against the wall. I was one of their preferred subs, but they would have kept me at that forever if I'd let them.

[AR]

I took a pay cut recently. I had a higher paying job in a more economically sound part of the country. I missed my family and friends, though, and took a 15% pay cut to move back closer to home. It's been difficult to get used to, but I believe my sanity is worth it.

[Mike Hunt]

I took 2 pay cuts in my career, both times were when having an unplanned job change. In 2002 the start up I was working for went under and it took many months to find a job. I turned down 2 offers that were a 45% and 40% pay cut and finally took a job that ended up being a 20% pay cut, and this was after negotiation.

In 2008 my two year ex-pat assignment ended and I took another job that had fewer benefits- the salary was a 5% pay cut and the new job did not have any housing allowances, so the real pay cut was more like 20% again.

Sometimes you need to accept the pay cut when you have no other choice, after that keep working on growing your career!

-Mike

[Trent D.]

I, along with everyone else at my previous company, took a 5% pay cut as the economy slowed down back in 2008. It was a sole proprietorship with about 50 employees.

We had some real all-stars on staff that were making herculean efforts to save the company, and they got the same pay cut as the obvious slackers and the people who had allowed themselves to become redundant.

The biggest hit to morale wasn't because of the pay cut, but because we chose to cut everyone's pay instead of just firing the people who slept at their desks, surfed the web 20 hours a week, or were just plain unneeded.

The cuts stayed in place even while our company's owner bought a new BMW and refused to invest in new talent and technologies.

[Tommy Z]

I was layed off and took a job at another company, resulting in a pay cut. Additionally, the new company I work at has only 5 possible raises once per year and are given out on a bell curve of performance. The better your performance, the higher your pay increase is. The problem is that the increases are 0%, 1%, 2%, 3%, or 4%.

The best performing employees get 4% raises...yet government employees get 4% alone for "inflation" increases plus increases based on seniority. This is crazy. Why should public employees get really nice raises year after year when we are the ones that have to pay for those raises...and our raises are going up much slower?

[ATL Dan]

I quit my last job in January to start this new one. The last IT job was slowly creeping more and more into my evenings and weekends and taking over my time with my wife and kids. They were abusing me more and more, being salary. I posted my resume online, had a couple of interviews, and chose this new IT job because of the hours being straight 40/week and if they need me to work overtime, they pay me since I am now hourly again! Straight yearly pay, I took a cut, but with some of the overtime I've worked, I might end up making more this year.

[Georgia]

My son worked for a company in the 90's when many, many companies were laying off, that tried a different solution. They let the temp help go (not actually their employees) and asked each employee making $25k and above to take a 10% pay cut until the situation got better. This was the only time I ever heard of them publicly - they were featured on CNN re their policy.

Fast forward to 2011. Hurricanes cut the power to their city for 1 full week. That month they paid 14 stories of employees the entire week they were off. This is a company that is employee friendly. Wish more were like that.

[ken]

My wife just took a 20% pay cut from what she was making plus about another 10-15% cut from what she could of got if she would of stayed. But we moved to be closer to her family and for a job she really wanted. The good thin is that she has even better benefits now.

I took a tiny pay cut from what i made last year, but now its completely salary and no commission which was about 40% of my last job.

Plus for both of us to find new jobs in a new city with high unemployment rate withing a couple weeks of each other was pretty perfect.

[John E]

Working in the petrochemical industry, the salary was only going up - until Amoco got bought by BP, then BP outsourced the IT department to IBM, so a bit of a reprieve, still going up, but then IBM outsourced us to India, that was the start of my self employment as a IT contractor. After learning to adjust to the sometimes flexible salary, I was working for a company that was going to be put up for sale, so they stopped all of the projects, and I was out of work for 6 months. That was extreme, but was able to pull it off with savings I had built up over the rich years. Then went back to work as a contractor again, but in a few years, a job with the local public radio station came open at what would've normally been a scary pay cut - but being out of work for that brief bit of time showed me I could survive on a less expensive lifestyle, so I took the job - a voluntary pay cut of almost 40%. but I love this job and wish I could've had it sooner. I'm 59 now and will begin distributions from my IRA next year to supplement my income, but it's a comfortable life right now.

[Mark]

Yes, effective July 1 of this year, I took a salary cut of just over 12% of my salary. Combined with increases in benefit costs, my take home pay went down about 15%. I mentioned this might come to pass in my profile on FMF from April 26...Unfortunately, it was even worse than the 10% I had anticipated.

[D]

I took a 5% pay cut going from the gov't contracting world into a gov't-like company (same benies as a govie, same job security, etc - but paid like a contractor). Hands down - best decision I have ever made!!!

[Kevin]

In 2006, I took a 6% pay cut as part of a reorganization of our department. In reality it was primarily a demotion of me sold as a reorg, but that is another story. Since then I have been at a frozen pay for the last 2 years due to the economy along with all my fellow employees. This year most folks got raises but I was told I was out of range for my current position. I should be grateful to have a job, but it gets discouraging.