When we think about our careers, we generally think More is MORE. More responsibility, more exposure, more
opportunities and – obviously – more money.
But times exist during a career lifecycle when LESS is more. Less money, that is.
While it seems counterintuitive, four situations may occur during your career when a pay cut could be expected:
- Your
company struggles to stay afloat financially,
- You’re
changing industries,
- You pursue
a new career later in life; and
- You choose
a job that actually pays less.
1. Struggling to stay afloat: The entire company is receiving a pay cut
What
you need to know: During a
financial crisis, companies need to reduce expenses. Fast.
And that means reducing big costs like compensation. One option is to institute an “all employee” pay
cut. Every employee may receive an
equal pay cut (as a percentage of annual base salary) to save jobs. During the recent economic recession, pay
freezes or pay cuts became common practice.
What
you should do: When everyone receives a pay cut, remember: it is not a reflection of your personal
performance. Additionally, assuming
the company stays afloat, pay levels should return to “normal”. Unfortunately, pay cuts may last indefinitely
– employers are careful not to promise when salaries will be readjusted. There are warning signs that the company
won’t recover. One clear signal the company is heading for the bottom: executives
start jumping ship. If you learn
about a significant senior management exodus, it is time to look
elsewhere. When you do decide to leave
and are answering questions regarding salary expectations, use the pre-cut
salary levels.
2. You’re changing industries
What
you need to know: Compensation practices are not “one size fits all”. Some
industries pay better than others. For
example, technology, professional services and investment banking pay more than
manufacturing, utilities and not-for-profits.
What
you should do: Realistically, if you have decided to change
industries, you have reasons (location, better work/life balance, different
career opportunities, etc.) However, other
areas of the compensation package can be negotiated to “compensate” for the
base pay cut. You can request a sign-on
bonus, higher annual bonus, equity (stock options or restricted stock), extra
vacation, or elimination of any benefit waiting period.
A few years ago, my client – a head of marketing – switched industries and needed to swallow a pay cut because the career advancement and growth opportunities outweighed the pay cut. Later she accepted an offer with another firm and received significantly higher pay because of her job experience.
3. You pursue a new career later in life
What
you need to know: While changing
careers provides personal fulfillment and professional opportunities, starting
over might mean starting over. “Experienced hires” (e.g., more than 10 years
work experience) who change careers can most definitely expect a pay cut.
What
you should do: Even
when chasing a new career path, you still add value and bring important skills
to the new role. Intrinsic or
qualitative skills such as leadership, project management, people management or
execution are valuable – you should NOT
start with entry level pay but just lower
pay. Minda Cutcher, owner of Senior
Services Provider, got laid off at age 51.
“I started my own business helping seniors navigate the financial
challenges of aging! It was born of my personal journey with my parents,” she
explains. “I’m using all the skills I
learned in the corporate world but putting my own twist on the personality of
my business. I'm not making as much money, but I'm having the time of my life
and doing good in the world!”
To leverage your previous experience and get the best pay
package possible, signify a commitment to the role by asking to have both performance
and pay reviewed in six months before
accepting the offer. Previous
experience should launch you up the learning curve faster than a “newbie”. After six months, if your progress
significantly exceeds expectations, revisit the salary discussion and request a
base pay increase.
I will add an important note here - personal brand is very important to maintaining your pay levels when changing jobs. If you have a bad reputation (i.e., Lori Loughlin), your chances of leveraging skills and values takes a nosedive. If you only make a high profile mistake - i.e., ESPN releasing the women's basketball practice early for NCAA tournament- you have a better chance of recovering.
4. Switching from a high-paying job to a low-paying job
What
you need to know: Some
jobs just earn less. Low-paying careers
include: marital therapists, radio announcer, firefighters and private
investigators. “I spent 20+ years
working in the back office of Wall St firms and as CFO of a hedge fund,” adds
Linda Heffernan, a business and economic librarian at UMASS Dartmouth. “I went back to grad school in my 50's to get
a degree as a librarian. I earn almost nothing now, but I really enjoy working
with students as an academic librarian.”
What
you should do: Options are
limited for maximizing earnings but the trade-offs (e.g., better work-life
balance or increased personal fulfillment and satisfaction) should offset the
compensation differences.
Conclusion
Other than when a company faces financial ruin, if a pay cut
looms on the horizon, explore other options for receiving a comprehensive
package to feel “whole”. Accelerated
performance reviews, additional bonuses or equity, more comprehensive benefits,
work-life balance or other ongoing training and development can be negotiated
to bridge the pay gap and “compensate” you for the lower pay.
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