5 minute read
Dealing with a Salary Cut
You love your job, but circumstances beyond anyone’s control mean that you have to take a pay cut. It is a bummer, but there are ways you can manage the situation and minimise the damage.
It may feel like the end of the world when you are told that your salary has to be slashed – being asked to take home a smaller cheque with no change to your workload is no one’s idea of career satisfaction! Unfortunately, this is a strategy that companies use when they need to tighten their budget in order to stay afloat during a global pandemic, recession and curtailed growth.
Although it is common knowledge that salary cuts are a necessary evil, it does not mean that the situation is easy to manage.
Because of this, it is important to figure out how to address the challenges that come with the situation. Especially if you love your job and the company has informed you of the pay cut respectfully and delicately, you may prefer to stay with your current job rather than take the risks with a new one. Besides, depending on the severity of the recession and the type of industry you are working in, there may not be many job openings in the first place.
So, the first step you need to take is to learn how to manage your emotions, your health and your finances while dealing with the pay cut. Tackle this challenge successfully, and you will look back at this moment as just a minor bump in your long, successful career journey.
Ensure the reduction is in line with government guidelines Identify your anxieties and mitigate them
When the results of the economic fallout in the wake of the pandemic and tightened budgets became more widespread, companies began slashing employee wages in a bid to maintain solvency while keeping their workforce in place without (much) retrenchment.
Although most employers have the power to reduce pay at any time, they will typically specify a period of time or circumstances which necessitate the smaller paycheque you will be bringing home. However, these cuts must follow strict guidelines the National Wages Council (NWC) put in place to protect employees. Do not be afraid to ask your employer for the parameters used to calculate your reduction as well.
Consider these ways to continue saving
• Familiarise yourself with the Flexible Wage System (FWS) • Ensure your salary cut is fair and reasonable • Check if you are eligible for the 13th month bonus • Check when your salary will be restored
If you were already dealing with financial stress and student loans even before the announcement of your salary cut, take some time out to settle your mind and emotions first. Although it can be a battle, you need a clear head to come up with a game plan.
When you have cleared your mind, start identifying your sources of financial anxieties by creating a list of bills you have to service, as well as present expenses. Then, think of ways on how you can work with a smaller paycheque, whether it is cutting unnecessary expenses or considering taking up freelance work.
• Extend your student loan tenure • Take advantage of insurance policies or national medical schemes (e.g. CHAS) • Tighten your budget
Adjust (or create) your budget
Consider taking up other sources of income
Once you have settled your anxieties and identified which areas of expenditure you can reduce, it is time to whip out your calculator and crunch the numbers. Budgeting is the first step to saving money in any event (pay cut or no), as it helps you assess how much money you have and what you can comfortably spend.
If you have never budgeted before, work out a budgeting system that fits your bill, or consider using the plethora of budgeting apps at your disposal to manage your money. It is all right if you do not get it on your first try, though. Figuring out an effective system and learning how to stick to it takes time, so be patient and kind to yourself as you track your expenses and back them up to your new (smaller) paycheque.
Other budgeting tips
• Delegate 20 per cent of every paycheque to savings • Open a second bank account for your savings • Create weekly and monthly savings goals • Time your purchases to sales periods • Observe a “no spend day”
If your salary cut means that you do not have enough money to cover essential expenditure, or you want to keep up the amount of money going into your present personal savings plan, think about refining your present skill set before setting up a side hustle gig.
Although your side gigs can be simply monetising your present hobbies, or a continuation of your present role, there are a few things you need to remember. For starters, the fact that you are supplementing your income with side jobs means that upon finishing up work at your company for the day, you will need to continue working on your additional projects.
Look ahead
When you have done all you can to secure and protect yourself in the present situation, it is time to plan your next move. If you have an idea of how long this will last, you can choose to stay on and negotiate for more non-cash benefits or even retroactive pay (i.e. a bigger paycheque in the future to make up for your present pay cut).
But if your employer has slashed your salary indefinitely or you have lost your motivation to work (regardless of how much you tried not to), you may want to also consider moving on to something new. Take note, though, that if the sources of your company’s struggles are recession-based, trying for a new job will be competitive.
Some non-cash benefits you can consider negotiating for
• Healthcare benefits (e.g. dental benefits, medical fees) • Education and training • Work and leave flexibility • Perks (e.g. company discounts, student loan support)
Conclusion
Dealing with a salary cut is not easy, but it is possible. When you are in the thick of it, focus on keeping positive and resilient. But if you find yourself barely making ends meet or you have become unhappy at your job, talk to your supervisor first before calling it quits. Whatever happens, take charge of the situation; do not just wait for it to overwhelm you before doing anything about it.
