Should you take a pay cut?

Chris Wodke

www.summittrainingpublications.com

Many firms and even local governments are asking employees to take unpaid leave or are cutting hours.  If  this is a temporary move and you like your job it makes sense to stay put.  What if you are job hunting and the offer is less than your expectations. I would suggest it is ok to take a pay cut under the following circumstances:

• Relocation
  You may be moving from an expensive area like New York or San Francisco, to a less expensive area like Dallas or Milwaukee.  If the cost of housing is much less to your new area, then you can afford a pay cut.  Do you homework and check the cost of living index.  Your salary should be in line with others in your field with similar experience in your new hometown.
  
  
• Changing Role
  If you are going from being a manager to an individual contributor the salary offered might be smaller.  It may be easier to find a non supervisory job. If there is room for growth in your new organization it may make sense to take the opportunity and work prove yourself to your new company.
  
  
• Career Transition
  If you are moving into a new field you may not have the experience to command a high salary.  The field you are moving to may have a lower salary range. You may start out at the lower end of the position pay range. If there is room for salary growth, this may be a good move. If you are moving from the business world into teaching, expect a lower rate of pay. 
  
  
• Quality of Life
  May be you are tired of 60 hour weeks, working holidays and weekends. If this new job gives you a better quality of life, it may be worth a cut in pay.  Jobs that are dangerous have long hours or rotating shifts pay well because of the disruption to your personal life. If you want better hours, weekends off and less risk a pay cut may be worth it.
  
  
• Non Profit
  Are you at a point in your career where you are financially secure and you want a job that is more rewarding. If you want a chance to contribute to a worthwhile cause, then working for a non profit might be a good fit. They also usually pay a lot less than for profit organizations.  The non tangible rewards may be worth the pay cut.
  
  
• Growth Opportunity
  If you are joining a start up company or a new industry (think computers or the internet 20 years ago) the salary might be low. Companies often offer stock options or other perks. If the company takes off you will share in the success. Because of the potential for payback it may make sense to come in at the lower pay.
  
  
• Benefits
  Look at the overall benefit package. A little lower base pay, may be off set by a great benefit package.  Are there flexible hours?  Is there an opportunity to telecommute?  How much paid leave is offered?  Look at the whole package to determine your total compensation.
  
  
• Contract to Permanent
  If you work on contract or are a consultant you will be compensated at a higher rate than in house employees because you are not paid benefits. If you want the stability and benefits of permanent employment it makes sense to take a pay cut.
  
  
• Downsizing
  If you are in an industry that is downsizing, pay may be decreasing throughout the industry.  Opportunities in industries like manufacturing and airlines can be limited. Compensation and benefits are decreasing.  If you don’t want to transition to another industry it may make sense to take a lower compensation package then you have had to land a job.
  
  
• Over Compensated
  Some firms pay higher than market rates to secure the best talent. If you are downsized out of such an organization you may have to take a pay cut.  Do your research to find out typical compensation for others in your field in your area.  This will help you to know the average pay range to expect. If you were on the very high end, you may have to accept a smaller base salary.
     
  

Sometimes in a tough job market you may have to take a pay cut or fewer responsibilities to secure a position.   Do your research for typical salaries for your skills and experience.  If you accept a lower salary, it may take some time to catch up to your old salary. Typical increase is 2-3% in most companies. You will have to weigh if you can afford to stay out of the work force or if you really need to get back to work to support your family.

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