Reducing salary
Feb 25 2009
Making staff cuts doesn't mean you have to give people the axe.
There are other ways of reducing your staffing budget without having to take the axe to your workforce.
A lot of companies will have some tough decisions ahead this year. Employment organisation Acas reported a 50 per cent increase in redundancy enquires over the last 12 months. A reality also reflected by the Confederation of British Industry’s predictions that unemployment will hit the three million mark by the beginning of 2010.
When faced with the double squeeze of low demand and a downward pressure to cut prices, recruitment company Tristar Oilfield Services opted to reduce salaries instead of letting members of staff go.
‘We don’t have any frills as we already run a very tight ship and there were no other things to cut. But we didn’t want to get rid of our guys because we really value them,’ says Marion Tapp the company’s accountant.
‘We asked all staff if they would consider a 20 per cent salary reduction. It helped to make it clear to them that it was either this or people lose their jobs. Everyone, including the managing director, has taken the cut.’
Salary reduction is written into the contract at Tristar, but this is the first time the company has had to use it. Tapp says the reduction will be reviewed in the next three months – or if things pick up before then. ‘I feel like we’re all in it together and the only way to get through it is together,’ adds Tapp.
If the option for a salary reduction is not in the contract, then you need to have some frank discussions with your staff. Ken Sharp, helpline area manager at Acas, says: ‘There are many industries that won’t have salary reduction in the contract and it’s not something you can do without agreeing with staff first. Strictly speaking once the change in salary has been made it should then be put in writing,’ he adds.
Ben Willmott, adviser at the Chartered Institute of Personnel and Development, says talking to staff has advantages when it comes to working out alternatives to redundancies. He says: ‘You may even have staff who want to go onto shorter working hours, but haven’t mentioned it due to not wanting to appear to have a lack of commitment to the company.
‘Businesses need to think imaginatively about how they can retain workforce levels – making people redundant and then replacing them can be very expensive,’ adds Willmott.
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