Message from employer: pay cut

[ziggy29]

If your employer cuts your pay by 20%, but then lets you increase your hours by 20%, so you have the same take-home pay, what kind of message is your employer giving you?

The message is: "The job market sucks and we intend to exploit it no matter how our business is doing... because we can and you have few options."

Unless you are FI, of course. Then you can tell them to pound sand and walk away. (This is another reason why it pays to be FI even if you *don't* plan to retire early. It gives you the option to get out of a crappy future situation.)

Also, this helps them reduce health care and other benefit costs because if you work 48 hours instead of 40, it takes 10 people to do 480 hours of work instead of 12. Thus they have to pay out benefits to 16.7% fewer people, and the benefits tend to be a fixed cost per worker.

The bottom line is that there is less correlation between a company's compensation policy and their economic performance than I can ever remember. Employers know they have their workers by the you-know-where and are not shy about padding their profits by taking advantage of their leverage. This seems to be most true for publicly traded companies where shareholders demand that management screw their workers because the market allows it, not because the business is struggling. Cut their pay, eliminate their health insurance, give us an extra 2 cents per share or you're OUT!

 

[JakeBrake]

Back in the day my MegaCorp "asked" all management people from the CEO to first level supervisors to "volunteer" to work a week without pay. This did not apply to non-management people. The stated reason was so that MegaCorp could meet its published objectives for the year. You were not allowed to take vacation or personal time.

In the first round there were almost no "volunteers". MegaCorp came back and said that this was not really "voluntary". After that I folded (fortunately, I was FI at the time) and almost everyone else did also. The identities of those who still refused to "volunteer" were made known to their co-workers. This was via the grapevine, not officially, of course

As far as I could tell the refusal to "volunteer" did not obviously affect anyone's career.

 

[packrat44]

This is another reason why a person should strive for financial independence early in their career. It allows you to drive the train rather than being taken for a ride.

 

[tryan]

My last boss at megacorp used to butt heads with corporate alot. They once backfilled his timecard with his vacation time for comp-days he took (worked his 40 ... took friday off ... they took 8 vacation for friday).

So his saying was "They'll pay 10 FOLD". Then promptly booked a business trip near his ocean front condo and "worked from home" for a couple weeks. Logging 8 hours M-F ... no questions asked.

Point being screwing the employee only works in the short term.

 

[ziggy29]

Point being screwing the employee only works in the short term.

Just curious: When was this?

I worked in Silicon Valley in the late 1990s and it might have worked then, especially for someone with a skill set in very tight demand. I can't imagine that working for 99% of corporate drones in this environment.

 

[Brat]

A few months ago, some of my former cow*rkers called to let me know that the company owner (a vile, sad, unhappy excuse for a person) informed them via email that effective at end of day he had sold all the assets of the company and they would all be terminated. The email went on to say that through his tough negotiations he was able to get the acquiring company to offer all employees their old position, but that he would be unable to pay them for accrued vacation or make the company 410k match for the year. Working through the acquiring company's HR department they were able to shame the mutha****** into paying their vacation and 401k match.

By the way, these employees are the ones that made him a multimillionaire.

In most states accrued vacation is payable at termination, it doesn't matter what deal he made with the purchasing company. The employees should consult an attorney who specializes in employment law.

 

[Rustward]

Not in Texas without a written agreement:
(a) For purposes of §61.001(7)(B) of the Act, vacation pay and sick leave pay are payable to an employee upon separation from employment only if a written agreement with the employer or a written policy of the employer specifically provides for payment.

http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=40&pt=20&ch=821&rl=25

Having said that, this is the first and only employer I have ever known to attempt to withhold accrued vacation pay on termination. See my description of the former owner in the prior post. I left out a few adjectives, greedy being one of them.

 

[Original Wally]

**but it's just like the stock that goes down 20%, and then goes up 20%.


Even worse.. coprorate profits go from, say, 100 whatevers to 25. Off 75%. Then simply return to the previous level of 100 and the headline screams "so-and-so's profits quarduple!" Sigh.

 

[heeyy_joe]

You are selling your time. You get to decide: price cut or sell your services elsewhere?

Personally, if these pirates are inclined to do this to the workers, you are likely to be there when they close the doors. Dust off the resume.

 

[clifp]

Within a year of joining my former employer. It was announced that all salaries were being cut by 10% (except for directors and above who took a 10% cut and eliminated executive bonuses) we are all told that in addition we were all told that from now on we were expected to work 10% more per week; and our "flex tim"e was we could arrive anytime before 8 AM and leave anytime after 6 PM except on Fridays when 5 PM was allowed. Hourly workers were exempt from the 10% more hours. (I think plenty of guys learned how to operated office machinery when the admins left at 5... )

Times weren't great in Silicon Valley at the time, so I and most of my coworkers stuck with it, thankful that we were not part of the large number they were laid off. They did however grant additional stock options, and repriced existing ones to $.625/share.

About a year and half when the company returned to profitability. They threw a big party, gave us a bonus to that made up for our lost wages and announced a new profit sharing plan. Reading accounts later, the company was fairly close to going under and the RIFs and pay cuts quite possibly made the difference between survival and bankruptcy and if management did not do this I probably wouldn't have retired early.

I guess the point being that in not all cases is upper management trying to screw its employees. Although in general I agree with Ziggy, in this job market many corporations are ruthless cutting wage expenses, because they can.

 

[growing_older]

In most states accrued vacation is payable at termination, it doesn't matter what deal he made with the purchasing company.

This does not appear to be so. In a few state, notable California, this is true. But in the vast majority of states the law only requires that accrued vacation is payable at termination if the employer policy is that it be so. Employers with a policy of not paying vacation time are permitted to not pay any accrued vacation in accordance to whatever policy they adopt.

State laws on vacation pay after termination

 

[Rustward]

In most states accrued vacation is payable at termination, it doesn't matter what deal he made with the purchasing company. The employees should consult an attorney who specializes in employment law.

Brat, what I believe you are referring to as a "deal" is the former owner taking credit for getting the acquiring company to hire the people. (If that really happened, who knows if the commitment to keep those people has a time limit?) He told the employees he could have gotten more from another place that planned to fire many of the employees. Nobody believes him. He is not trustworthy.

These are professional workers. I know at least one who contacted a lawyer.

It is a small place that has been steadily shrinking for several years. There were probably less than 20 left.

 

[ziggy29]

I guess the point being that in not all cases is upper management trying to screw its employees. Although in general I agree with Ziggy, in this job market many corporations are ruthless cutting wage expenses, because they can.

It isn't in all cases, but in *this* economy, it happens a lot even with a company posting record profits.

For example, if a Silicon Valley business tried this in 1998, they would quickly be hit by a massive brain drain. These days they know they have almost all the leverage in most cases, and they aren't shy about wielding it. Even if they are posting record profits -- it doesn't matter.

 

[FUEGO]

About a year and half when the company returned to profitability. They threw a big party, gave us a bonus to that made up for our lost wages and announced a new profit sharing plan. Reading accounts later, the company was fairly close to going under and the RIFs and pay cuts quite possibly made the difference between survival and bankruptcy and if management did not do this I probably wouldn't have retired early.

My former employer did something similar. We were very heavily reliant on the real estate development industry, so 2008-2009 weren't pretty years. 10% pay cuts to managers, 6% IIRC pay cuts to the grunts. RIFd 25% of the employees in 1 cut, then another 25% left within a year. I think everyone understood that the cuts were necessary to keep the company from going under. In hindsight they didn't have to be that steep.

Now the company is doing great, and has returned to pre-2008 profitability (with a smaller staff). They reinstated pay before I left in 2010, and now they are back to paying bonuses and giving regular raises. As a partial owner of a few percent of the company via my ESOP I'm pretty happy with the stock price increases last year!

Some competing companies and some of our clients went totally belly up during 2008-2009, others cut pay 10-20%, some cut 2/3 of their workforce, etc. Most of those that cut hard and deep early enough are still around and profitable today from what I have seen. At my former employer it was a great time to separate the underperforming employees and keep the best employees (which in spite of management's general ineptness, they executed fairly well).

 

[Brat]

This does not appear to be so. In a few state, notable California, this is true. But in the vast majority of states the law only requires that accrued vacation is payable at termination if the employer policy is that it be so. Employers with a policy of not paying vacation time are permitted to not pay any accrued vacation in accordance to whatever policy they adopt.

State laws on vacation pay after termination

It is true in Oregon and Washington as well. Many states have an 'agreed rate of pay' statute. It has been years since I worked in NY and NJ, they had comparable requirements at the time.

 

[tryan]

Just curious: When was this?

2002 ... our VP didn't care what we did (as a Dept ... just meet your numbers). It was HR who was "adjusting" timecards.

 

[Hamlet]

During the tech meltdown my company did something similiar. Regular employees took 5% cuts, management took 10% cuts. The benefits got worse in a dozen little ways.

It was hard to get too worked up about it because it was obviously a terrible time in the industry, and it was clear that most companies in our field were fighting for survival.

I think it was very important symbolically that management took a larger cut than the rest of the workers.

We survived, although it was touch and go for awhile.

For people in my field, the tech meltdown was a much, much worse recession than the 2009 one.

Within a year of joining my former employer. It was announced that all salaries were being cut by 10% (except for directors and above who took a 10% cut and eliminated executive bonuses) we are all told that in addition we were all told that from now on we were expected to work 10% more per week; and our "flex tim"e was we could arrive anytime before 8 AM and leave anytime after 6 PM except on Fridays when 5 PM was allowed. Hourly workers were exempt from the 10% more hours. (I think plenty of guys learned how to operated office machinery when the admins left at 5... )

Times weren't great in Silicon Valley at the time, so I and most of my coworkers stuck with it, thankful that we were not part of the large number they were laid off. They did however grant additional stock options, and repriced existing ones to $.625/share.

About a year and half when the company returned to profitability. They threw a big party, gave us a bonus to that made up for our lost wages and announced a new profit sharing plan. Reading accounts later, the company was fairly close to going under and the RIFs and pay cuts quite possibly made the difference between survival and bankruptcy and if management did not do this I probably wouldn't have retired early.

I guess the point being that in not all cases is upper management trying to screw its employees. Although in general I agree with Ziggy, in this job market many corporations are ruthless cutting wage expenses, because they can.

 

[HFWR]

During the tech meltdown my company did something similiar. Regular employees took 5% cuts, management took 10% cuts. The benefits got worse in a dozen little ways.

Sounds familiar, though I don't believe our management took much of a hit. In fact, they seemed to be adding more layers of [-]BS[/-] management even as the worker bees got fired.

Acting associate part-time director of vice-presidency and such...