Ask HN: Should I sign a pay cut agreement?

#1

Post by folivore » Mon, Mar 20, 2023, 5:42 PM UTC

Hi!

My employer recently announced a 10% pay cut across the board. Where I live(South Africa), employee consent is required.

The company sent out a document asking us to sign in agreement.

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This is the state of things now:

* Company laid an unknown number of employees off, and laid them off without letting employees know until a week later in a meeting where they announced pay cuts

* The company is pretty much full remote and the office is a nice-to-have. It is in a very expensive part of town.

* Lunches once a week are catered at the office

* I asked what happens if one were not to sign, and the response was "Oh, we haven't thought about that. We're hoping that everyone pulls together."

* The situation will be reviewed quarterly

* Company says they don't expect it to last very long, also citing this for why they kept the office

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A few things stand out to me and feel like red flags, namely:

* They chose to cut salaries rather than cut the office rent and catered lunch/snack expenses

* They have no plan should someone not sign. I would think they would have planned that out, specially since they went on about how long it took them to make this decision.

* Layoffs were hidden until an announcement, which was also ambiguous where people thought it was still coming.

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My options are to sign and take a pay cut, or refuse to sign and see what happens. Law here says I am entitled to what effectively comes to a layoff, but I can't predict what the company will do.

The pay cut also makes my life a lot harder since we were already on a tight budget.

I would appreciate any thoughts, knowledge, or advice you might have.

I know you are not a lawyer and I am not expecting you to be, but lawyers can't speak to real world experience from others in the industry. I am currently finding a lawyer to assist.

Re: Ask HN: Should I sign a pay cut agreement?

#2

Post by andrewfromx » Mon, Mar 20, 2023, 5:45 PM UTC

In the US they don't do this. The thinking is someone getting a lower salary and the same job will not be very motivated. It's better to just get them go and keep other employees at their same level or higher.

Re: Ask HN: Should I sign a pay cut agreement?

#3

Post by folivore » Mon, Mar 20, 2023, 5:48 PM UTC

andrewfromx wrote: post #2

In the US they don't do this. The thinking is someone getting a lower salary and the same job will not be very motivated. It's better to just get them go and keep other employees at their same level or higher.

I would love to know how people at the company feel about this in terms of morale. It's hard to bring this stuff up. I would rather be laid off than have this because there's at least a runway with known pay to find a new job.

Re: Ask HN: Should I sign a pay cut agreement?

#4

Post by throwawaysalome » Mon, Mar 20, 2023, 5:56 PM UTC

"We're hoping that everyone pulls together" is just a polite way of saying "My way or the highway". At-will employment works the same everywhere.

Re: Ask HN: Should I sign a pay cut agreement?

#5

Post by orangesite » Mon, Mar 20, 2023, 6:00 PM UTC

An agreement to take a pay cut is effectively an agreement to commit to an ongoing investment of 10% of your current salary in the company for an unspecified amount of time for no return and the sacrifice of the capital amount.

A good benchmark would be to ask yourself what the return would be if you invested 10% of your salary in unit trusts over the same time period.

This is not a good deal and I would be hesitant to entrust my career to a management team who feel it is okay to ask this of their employees.

There are a number of ways this could have been structured, including:

1. An agreement to pay back the 10% plus interest @ prime within a specified time-frame.

2. Issuing of a comparable amount of shares in the company in exchange for the 10%. Dividend-bearing if a private company, trade-able on the JSE if public.

Re: Ask HN: Should I sign a pay cut agreement?

#6

Post by folivore » Mon, Mar 20, 2023, 6:08 PM UTC

throwawaysalome wrote: post #4

"We're hoping that everyone pulls together" is just a polite way of saying "My way or the highway". At-will employment works the same everywhere.

Fortunately I am not employed at-will but I do honestly think that answer is genuine.

Re: Ask HN: Should I sign a pay cut agreement?

#7

Post by folivore » Mon, Mar 20, 2023, 6:10 PM UTC

orangesite wrote: post #5

An agreement to take a pay cut is effectively an agreement to commit to an ongoing investment of 10% of your current salary in the company for an unspecified amount of time for no return and the sacrifice of the capital amount. A good benchmark would be to ask yourself what the return would be if you invested 10% of your salary in unit trusts over the same time period. This is not a good deal and I would be hesitant…

Thanks. That's a new way of looking at it for me. No form of compensation was offered other than "wait and see." So I don't feel confident that they will make up for it if things do get better. I don't want to suffer through a pay cut and then be laid off if they do worse either.

I have some options in terms of contacts. Perhaps it's a good idea to reach out.

Re: Ask HN: Should I sign a pay cut agreement?

#8

Post by necovek » Mon, Mar 20, 2023, 6:13 PM UTC

throwawaysalome wrote: post #4

"We're hoping that everyone pulls together" is just a polite way of saying "My way or the highway". At-will employment works the same everywhere.

It sounds more like they hope they won't have to fire more people (probably so they can still achieve their goals), but not agreeing to it ensures there is government support for an employee in case of a layoff (guaranteed severance, unemployment benefits, pension fund contributions etc).

Depending on the market and your personal circumstances, you just need to put ~3 outcomes on paper and decide what's best for your family and you: you agree to a paycut, you don't agree and don't get fired, or you don't agree and you get let go.

Re: Ask HN: Should I sign a pay cut agreement?

#9

Post by mikebos » Mon, Mar 20, 2023, 6:18 PM UTC

Forget about the company, this boils down to choices. Can you get another job relatively easy within a month, or for as long as you can finance your unemployment?

If the answer is no, you need the job and most likely should take the pay cut.

Whatever your choice will be, it's time to start looking for a new job. The behavior you describe in your employer sounds to me like they don't put value in employees.

Re: Ask HN: Should I sign a pay cut agreement?

#10

Post by smallerfish » Mon, Mar 20, 2023, 6:45 PM UTC

andrewfromx wrote: post #2

In the US they don't do this. The thinking is someone getting a lower salary and the same job will not be very motivated. It's better to just get them go and keep other employees at their same level or higher.

That's not true - my last two companies have done haircuts along with layoffs. At my current company we were promised a bonus of Nx the haircut at a certain point in time as compensation...though whether that happens or not is still to be seen.