Does 10% Reduced Pay = 10% More Time?

The Chicago Sun Times had an interesting article today by Sandra Guy on companies opting to reduce employee pay rather than conduct layoffs. The article poses the question, is it a better business strategy to retain employees but reduce pay? I can relate to the guy they interviewed, Dustin Hinton, who took a 10% pay cut to keep his job. He would rather work for less if it means retaining his job and being able to provide for his family. Who wouldn't feel the same? What the article doesn't mention, however, is whether Hinton has also received 10% of his time back.

Earlier this year I negotiated a four day work week with my boss, and took a 20% pay cut. Once the deal was made, I fretted over my decision. How does one advocate for a 20% pay cut? What was I thinking?! Three months later, I can safely say that my time is worth that and more for the activities it allows me to do--write, clean, do errands, organize the house...not to mention spend more time with my daughter. As a result, my family can actually relax on the weekend (no laundry, cleaning, or grocery shopping to do...)

My sense is that a reduction in pay accompanied by a reduction in hours would be a wonderful strategy for businesses. It would help them to retain valuable company knowledge (which is lost in a layoff), while also giving employees a break (which could increase morale). What worries me, however, is that companies will reduce pay without reducing hours, reduce 401k benefits and health care...and that, people will get used to living with less and expecting less from their employers.

That's why I'm advocating that if your company has approached you about taking a pay cut, ask them for extra time off in return. Assure them that this will not have a negative impact on your productivity at the office. (In fact, I think I'm more productive as a 4-day employee because there's no time to waste). Plus, if your reduced wages mean you need to take on more work (like Hinton and his wife) than you will want that extra 10% of your time to make up for your loss.

Do you have a Layoff Action Plan?

An article in The Wall Street Journal today reports that employment law specialist Garry Mathiason of Little Mendelson (a firm that handles approximately half of the layoffs in the US) estimates that the "US could lose around three million jobs from January through March".

With that in mind, it's a good time to create a Layoff Action Plan. I didn't see my layoff coming until the morning of the event, so it's wise to be prepared. It's also helpful because while compiling your plan you'll face your fears head on.

You might find that you're more prepared than you think. We managed to reduce our spending and actually save some of my severance. Here are some items to consider:

Money: Okay, not brain surgery here. You'll need money if you're laid off. Do you have 3-6 months salary saved up? Do you know the amount of the check you would receive from unemployment? Do you know what your company's severance policy is (check your company handbook)?

Budget: Once you've established how much money you'll have while unemployed, it's time to examine your expenses. What's the bare minimum you'll need to get by (rent/mortgage/utilities, car payments, food)? What could you live without temporarily (cable, video rentals, gym membership, take out, maid service)? Do you have student loans? If so, does your loan offer an option to defer or reduce payment while unemployed?

Health Insurance: As someone who currently manages benefits, I can tell you health insurance is expensive. If you had to pay COBRA, what would it cost you? Remember, you're going to have to pay your contribution plus the contribution your company paid for you while you were employed. It could be anywhere from $150 to $1000 depending on the level of coverage and who's on your plan. A spouse and/or family dramatically raises your rates. Could you join your spouse's plan if you needed to?

Childcare: How flexible is your childcare center? If you wanted to reduce the days your child attends do you know the daily rate (this is often higher than the week rate)? How long would they hold your child's full time spot if you had to temporarily go to part time?

Manager to COO via Layoff

It was a little over a year ago that my boss called me into her office at 9am to deliver the news "your job has been eliminated." Since then, the number of layoffs across the country has steadily increased to the point where no one is truly safe at their company.

My goal in writing this blog is to focus on the positive aspects of a layoff. As it turned out, mine was one of the most transforming experiences of my life. When I started my search, I was an underutilized mid-level project manager. By the end of my search, I was the chief operating officer of a growing non-profit.

Simply put, it would have been impossible for me to get from point A to point B without the layoff in between. A layoff provides a number of job search tools that most people don't have access to while working, including:

Networking: Access to contacts and recommendations from bosses and colleagues who it would have been awkward to ask while still employed.

Time: Finding a job is a job. And you've just been promoted from freelancer to professional. It's your job to meet interesting people for coffee, lunch and drinks; brainstorm dream jobs; and search the Internet in your pajamas all day...

Money: It's the one and only time you will be paid to search for a new job. Between the severance check, unemployment, and savings, most people have some time before they need to consider supplementing with part time work or consulting.

Urgency: Employed people can waste years searching for a new job while clinging tightly to the one they've got. As a new member of the "unemployed", you *must* find a new job and that means you'll find one sooner than your employed counterpart.

For these reasons and more, being laid off can be a once in a lifetime opportunity for personal growth, renewal and promotion. So, if you're newly unemployed, congratulations! This is your first step to getting the job you've always wanted.