The Chicago Tribune reported this morning that Acco Brands was cutting most of its workforce of 2,000 people’s pay by 47% to “improve its first quarter results”. A spokesperson for the company said this was an alternative to permanent layoffs.
Cutting employees pay is never a good business strategy. If your company needs to cut employee expenses, you need to cut people not payroll. In my businesses, I have done it both ways. I have learned that it is better to cut people and keep the employees that are working hard at full pay. If you cut pay instead it is like saying to your employees, “keep working hard for the company at alot less pay”. How do you keep morale up at places like Acco Brands when you do this?
Employees would much rather have other employees cut than to cut their own pay. After you do layoffs, then you can rally the employees that still have their jobs and keep their morale high.
What have you chosen to do at your company during tough times?
Well, we decided to do it the other way. Actually, I was very pleased. Here’s how it was presented:
We can either reduce headcount 10%, or we can cut things. We choose to cut back things:
The matching gift program is now suspended
The 401K match is now suspended
Staff making over 100K/year will see a 5% pay cut
Staff making between 75 and 100K will see a 2.5% pay cut
All other staff will see no cut.
Plus, the CEO has taken 2 pay cuts in this time – the first was before anyone else got cut.
I think the advice depends on the economic context. If a firm, in a vacuum, faces this question, cutting heads is better for the firm’s health. If, however, you’re in a really cruddy economy, with no real end in sight, I think most employees have a compassion gene that gets activated. Keeping people off unemployment when people are not hiring can be swallowed by all but the callowest people.
[…] 8:32 pm | In 9 to 5, Career life, Corporate life, Modern life, Small Business life | Barry Moltz comments on Acco Brands, which cut its staff’s pay by 47% to shore up its corporate […]
@Eric- context is important.