Published: 01 March 2023
With a global recession looming, many organizations are exploring measures to manage costs and keep business thriving. To make the right choices, total rewards leaders can review employee preferences across different demographic groups toward the temporary reduction of pay to avoid layoffs.
Only one in three employees are willing to accept a temporary reduction in their pay to avoid layoffs and furloughs. Implementing organizationwide compensation reductions can lead to significant talent risks.
Employees show the greatest willingness to have their short-term incentives reduced to avoid layoffs. By contrast, they have the least tolerance for reductions to the organization’s contributions to retirement plans and healthcare costs.
Employees’ tolerance for pay cuts diminishes with the duration and the severity of the pay cut. Though employees’ preferences differ, tolerance decreases significantly for pay cuts of greater than 10% for a duration of longer than six
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Human Resources Research Team
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