Have you had to deal with a pay cut/freeze recently? Inflation over the past few years has meant a pay cut in real terms. Of course, this is even worse for countries where devaluation ran wild last year, like Ghana and Nigeria.
Ghana’s inflation rate for December was the highest since it reached 59.7% in April 2001. And The World Bank has warned that if significant changes are not carried out, Nigeria risks experiencing a recession akin to 2016.
2022 was challenging for many businesses due to the economic uncertainties brought on by inflation, and 2023 is likely even more challenging. Many companies are preparing for this by cutting costs and looking for ways to preserve cash. This includes layoffs, hiring freezes, pay cuts and increased freezes.
Not to be a harbinger of negative predictions, but a pay cut or salary slash can happen to anyone, including you. Hence, what do you do if you suddenly face a pay cut?
1. First, assess the situation/context.
Here are some questions that can guide you on that
Are these good people? Do you believe the leadership has the organisation’s best interests at heart and is doing what is necessary to help everybody survive and save jobs?
Was the process fair? Is it clear who in the organisation is affected and why? You need to clarify if this initiative was a company-wide pay restructuring or if it involves only you or, in some cases, your team.
Is there a time limit for the cut (e.g., the next three months or six months) which gives you some certainty?
Did they do anything illegal? e.g. cut out medical care ‘which is an obligation under most labour laws. Knowing whether the pay cut is because of the company or because of you can help you decide on your next course of action, but there are other things you can do.
Knowing whether the pay cut is because of the company or because of you can help you decide on your next course of action, but there are other things you can do.
If it is not about the company’s situation, then it could be about you, which could be understandably distressing,
Companies often propose individual pay cuts if they need to receive value commensurate with the employee’s earnings. You may have come on for a senior manager role, but five months later, you are not up to it, and while they might be okay with you keeping the title, they might bump you down to a manager’s pay.
However, this should appear in “your performance reviews”, and it’s up to you to accept such a cut.
If you feel that the salary cut is not justified, you can negotiate with your employer to see if there is any room for compromise.
This could include asking for additional benefits or flexible working arrangements to offset the lower salary. Of course, this will depend on how much leverage you have with your employer; in some instances, negotiation may get you closer to the chopping block.
3. Look for additional income streams.
If the salary cut is significant, consider looking for additional income sources, such as taking on a part-time job or starting a side hustle.
In 2023, everybody is thinking about their “career portfolio”. Maybe a pay cut is the wake-up call you need to put some of your hard learnt skills to use in other ways.
4. Cut expenses
Review your budget and see any expenses you can cut to compensate for the lost income. This could include cutting back on non-essential expenses or finding cheaper alternatives for regular expenses. This could also be an excellent time to set financial boundaries (if you didn’t have any yet) and end extra responsibilities you have long wanted to give up but didn’t know how, e.g., black tax. Consider being intentional about your level of financial literacy.
You can sign up for Jobberman’s Financial Literacy course to upskill in this regard.
5. Look for a new job
If the salary cut is not something you can accept, start looking for a new job that pays a salary that is more in line with what you need. Be sure to update your resume and start networking to increase your chances. You may not get a new job immediately, but you will feel better knowing that you are trying to.
If this is your preferred option, consider creating and completing a job seeker account to 100% to give yourself the best chance of being found by employers.
You can also take a look at this video, where I talk about what the Labour Market could look like this year.
A salary cut can be difficult and stressful, but staying positive and keeping a long-term perspective are essential. Remember that it’s just a temporary setback, and with careful planning and a proactive approach, you can find ways to manage the change and achieve your career and financial goals.