Should I sign a pay cut agreement?

I was once asked, during the original dot-com crash many moons ago, to take a pay cut. I replied, essentially, that this was fine by me, as long as I could cut my weekly hours proportionally (I was working full time). I never heard anything more about it, and my pay was not cut, nor was I asked to reduce my hours. This was a small company, and at the same time, other people at the company were being let go.

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.

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

Real-estate is surprisingly hard to get rid of. Depending on the size they might be stuck with a multi-year lease. Cutting snacks and lunch doesn't substantially change the equation.

That said, I'd start looking for another job. Layoffs AND a paycut for those that remain doesn't fit well. Might as well layoff more people and keep the others "happy".

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.

I've only been in situations where pay-cuts were offered a couple of times. In both cases equity was offered. In the more recent case, equity was offered with instant vesting, and there was a commitment to repay the deducted pay in full after the situation (short-term cache flow issues due to delays with fundraising) had ended.

The 2nd case was obviously a better deal, the only risk to me was that the fundraising would fail completely. If they're not offering you any kind of upside, you need to push back.

I think you need to figure out how important you really are to the company, and how competent your management is.

Are you in a position where, if you leave or are let go, the company would be hurt? (And the management is competent to know it?) Then hold your ground. Point out what will very quickly happen if you were to leave or be fired.

Otherwise, just ignore the request as long as possible and change jobs. If it's customary to give notice before you leave, make it abundantly clear that you're only staying through your notice period at full pay.

(Also, FWIW: In the US and many other places in the world, a lot of high-tech companies are run by people who have no clue how to run a company. Some people come from money and are just trying to follow in their parents' footsteps. Other people are just gambling and keeping up appearances. If you work for someone like that, now is the time to change jobs.)

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.

Just as a general negotiating tactic / principle, I'd avoid doing this for free / nothing.

I'd respond positively and explain that you understand the situation and would like to help. See if they can offer fewer hours, more vacation time, equity, debt, promotion... literally anything in exchange for this reduction.

Everything has a price, and nothing is for free.

Once you sign that stuff, your overall compensation goes down forever. Your raise and bonus will less since it's based on your overall salary, which is now cut if you sign.

Then when the company lays you off, your severance package is even less due to the same reasons as above.

The whole thing is going to have cascading effect, and since you can't predict when you'll be laid off given how cavalier they've been doing it so far, better not to sign it. Seems like the company is trying to cut costs before laying off again to save even more money.

And even if you are laid off because you didn't sign, at least you'll have the satisfaction that you didn't bend over backwards for their crap. Staying true to yourself is what you'll regret the least in the long run.

"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.

I was working for a small web-dev shop during the 2008 crash and took a pay cut at the time. I knew the owners pretty well (they worked in the office too, at desks just behind mine), and knew the business was under a lot of pressure, so I didn't begrudge it. Working anywhere else meant a much longer commute, so I stayed ... until they paid me late one month and I found another job and left. Again I didn't hold it against them personally, but not-getting-paid would have been a big deal for me and my family, and getting paid late meant the risk had gotten too high for me. The business turned the corner eventually and is still going, but I actually enjoyed the other job much more and the move ended up being a big leap forward for me career-wise

So basically here in South Africa this isn't illegal, but you need to consent to it. The company's choice after that is to either ignore it or to start a Section 189 retrenchment process. Also there are some other rules in place that regulates when it's ok to do and when not.

Have a look at this link for some more answers: https://deale.co.za/unpaid-salaries-labour-law-in-a-nutshell...

Overall I'd go with 10% isn't a huge problem and to just agree to it, but keep your eyes open. I know of other companies during Covid that did 50%, or reduced working hours etc.

I feel your pain... heaps of credit card debt but was making a very good salary and my company cut my pay and only gave me a month's notice, so I've spent 2 years essentially playing catch up now to pay off my credit cards instead of the 6 months it would've taken.

I didn't get a choice though I didn't sign anything either. It just happened. So now I just show up and do my job. Nothing more, nothing less, no overtime, I don't volunteer for any additional projects. Very cut and dry. After 10 years of working for the same company and that's the thanks I get, I appreciate the fact that I'm still employed. And that is all I need to be.

You may be stuck or just don't sign.

I would take the pay cut and use the working hours to get prepared for future tech interviews. In any case, I guess you don’t want to work for them anymore.

Not a place you want to invest your time at. Look for other opportunities m. Not sure if the local regs, but maybe they are just looking for a way to cut costs on the next round of layoffs. Typically unemployment comp is based off prior comp levels.

> 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."

My next question would be "what are the benefits of taking a pay cut?"

I was in a similar situation in April 2020. I think we had to sign a 20% pay cut. COVID having just started, I signed. After 6 months, they reverted the salary, but I left shortly after. I still regret signing the pay cut

Would this decrease the amount you’d get as severance if you were laid off?

I think all we can do is ask questions and help you reason about this. Whatever decision you make, at least it will be informed and not rushed.

I'd be going with option 3: Start shotgunning resumes. Clueless management will remain clueless, even if they luck their way out of this particular crisis.

Around 2010 the company I worked for had a pay freeze. Most employees worked in the office, but about 1/4 worked remote. About three years later the freeze was lifted. The in office employees were notified about said policy change and got raises shortly thereafter. Us remote employees didn't know about the change until almost 2 years later. After an in office employee mentioned it to one of us.

When we brought it up to management they were apologetic, and said they forgot. I work for a small company that wasn't particularly organized so it's possible they forgot but still. :(

TL;DR; If you take the pay cut, check in every few months with both management and others at your level.

If you want to keep the job, sign it.

If you don't, don't.