Earning Less

I’ve spoken with countless people who have kept their jobs, but have had their pay cut or frozen – from a software developer who survived a layoff (but with a 10% pay cut and increased hours, work, and stress) to an executive at a local high-tech company that just completed annual reviews (which included telling all employees that there would be no merit or cost of living increases this year).  I also work with a lot of job seekers and many are interviewing for jobs that are $10K – $15K below what they were earning before they were laid off.  And, of course, the big news last week was Microsoft’s announcement that they are cutting contractor rates by 10% (which has caused quite a flurry of activity on local discussion boards).  Does Microsoft have real financial issues that require this action or are they taking advantage of the recession by reeling in bloated budgets and pay at a time when it will be more accepted by employees and the public?  Does it matter?  Regardless, the clear trend is that even those who are keeping their jobs are earning less.

The February issue of HR Magazine addresses this trend in several articles.  In one titled “More Pay and Benefits Cuts,” they state that “companies that have implemented salary freezes jumped from 4 percent in October 2008 to 13 percent of those surveyed two months later…”  Also, “61% of employers reduced their planned merit increases for 2009 from 3.8 percent to 2.5 percent.”

Another article titled “Strategies for Saving in a Down Economy” states that “one in four companies expects layoffs in 2009” and then provides a list of expected cost saving actions this year.  25% of companies will implement a hiring freeze, 25% will raise employee contributions to health care premiums, 12% will implement a salary freeze, 4% will reduce employer matches to retirement plans, and 4% will reduce salaries.  In the list of the 10 most likely HR related budget cuts this year are professional development, tuition reimbursement, and fitness benefits.  In other words, your pay may be frozen and you’ll need to pay for that gym membership.

So, just as real estate prices are “adjusting,” so are our salaries and career paths.  Other than feeling frustrated or depressed, what can you do about it? 

Well, if your salary is frozen or cut, don’t automatically think that looking elsewhere is the way to go.  Know that it isn’t personal and it is happening all around you.  The equity you have built up at your current company is worth a lot more than earning $5K more at a company where you’re the newbie.  Think of it as sweat equity – you have a level of knowledge, intimacy, trust, and flexibility that can only come with time served.  All of that is out the window and you start at zero when you start a new job.

If you’re a job seeker, you may need to lower your salary expectations.  And, if you are applying for jobs that are not as senior as your last role, when you answer the “what salary range are you targeting in your job search” question, don’t tell them what you earned in the senior role.  Tell them what you earned when you were in a role similar to the one you are interviewing for.  Or say, “Based on my research on salaries in this industry and for this role, I am targeting between $x and $x.”

www.woodlandrecruiting.com