How to talk to your staff about pay cuts - SME Resources for #copingwithcovid
There’s no easy way to say this. But pay cuts are the lesser of two evils when we’re faced between total business failures with mass layoffs versus less money but guaranteed income for all.
As you may have read in our previous posts, unless your business model is providing necessities and essentials during this time, you are likely to have taken an incredible nose-dive in sales and supply chain security. This means you’re managing your finances to survive over the next quarter (if you haven’t started click here), and you’re at the point of negotiating and executing cost cutting, and this means cutting salaries.
“Regardless of what kind of leader you are, communicating this with sincerity
is the right thing to do.”
If you’re inclined to be positive, try not to offer any false assurances because we simply don’t know when things will improve.
And if you’re already feeling the welling of stress in your chest then breathe it out first before talking to anyone, the risk is walking into a sensitive conversation with your walls up and walking away with regret.
And if you lack confidence in conflict then check your finances before the conversation, it’ll be a stark reminder of what you need to say before agreeing to no pay cuts, just remember: business failure and mass layoffs is where everybody loses, you and your team. Especially if you’re in a country where a stimulus package is unlikely to be injected or will not be directly spent on SMEs and on people.
Before you read the bullet-pointed scripts below, please keep these in mind:
They’re afraid too. So it’s your role as their manager/leader/someone-who-takes-some-of-the-best-hours-of-their-day to provide them with a sense of certainty. That they are not alone, and that even though there will be cuts they will be looked after. We want to remove fear and uncertainty because it leads to more anxiety, worry and thus irrational behaviour, which is not good for you or them.
Many are expecting to be laid off or to receive a pay cut already, while others are not, so try not to put expectations to these meetings. Some will push back, others will work harder for you.
Have these conversations one on one. It’s much more likely for you to get a positive response and it gives them an opportunity to react in privacy in case the situation exceeds their emotional tolerance.
We have seen some staff members flatly quit and leave, so be prepared for this, as long as your operational gap is covered and you can keep morale steady, it is likely a blessing for your organization.
We’ve assuming you are deducting more salaries from management than from your lower ranking staff members for this script, if not you can omit this bullet point but we highly encourage you to do this. Read our blog about Crisis Management during Covid to see why and how.
If you’ve done your forecasting into Q4, you have may started speculating a payback scheme for your team members. If so, definitely communicate this because it’s one of those rare instances where they get to see your ethics and leadership shine. (Assuming you’ll actually do it of course!)
Communicate this sooner rather than later. Remember that part about uncertainty? Yeah, they’re feeling it right now, imagine living with this thought every time you are reminded about money, the economy, your family, your job, healthcare, increased prices of food and necessities, the list goes on, do your team (and yourself) a favour and have this conversation once you’re organized.
Without further ado, here is a bullet pointed script for talking about pay cuts with your team, it also includes a sample script on why you’ve had to close or why you’ve decided to stay open:
Script — If you have shut
As you know, it’s a hard moment for everyone. Our company cares about our team and our customers, so we think it is wisest to close temporarily to protect our team and customers from the virus.
Because of this we are receiving no income at all.
The reality is that we don’t know when we will reopen again, so we have to manage our cash carefully so there is enough for everyone. There is a chance we may have to close for 2 months and still have to pay all the salaries.
Unlike some other places, we are NOT going to fire our staff or send them for unpaid leave, we know they have families and loved ones to look after.
And in order to do this, we will be reducing the pay of everyone fairly so everyone has enough during this period to survive, such as buying food and medicine.
For your information, the whole management team will receive the most pay cuts so the staff with the least amount of salaries don’t have to take so much cut in their salaries. It’s their way of looking after their teams.
So, the important thing now is:
Stay safe, practice good hygiene and social distancing.
TELL your friends and family to take it seriously, even if they are healthy and if they meet their friends then come home, they will likely spread it to their parents and family.
Stay positive, it will get better, together we can get through this as long as we keep working hard, together as a team. I’m here for you.
Script — If you have not shut
As you know it’s a hard moment for everyone. Our company cares about our team and customers and have decided to stay open to keep getting whatever income we can get to keep paying salaries, we believe that we can get through this if we persist, stay strong, stay safe and keep doing a good job for our customers.
But, the reality is that our sales have suffered very much, and in order to keep the business running whilst paying salaries we have to manage our cash carefully so there is enough for everyone.
Unlike some other places, we are NOT going to fire our staff or send them for unpaid leave, we know they have families and loved ones to look after. We believe it is better to receive a little less so everyone can keep their jobs.
In order to do this, we will be reducing the pay of everyone fairly so everyone has enough during this period to survive, such as to buy food and medicine.
For your information, the whole management team will receive the most pay cuts so the staff with the least amount of salaries don’t have to take so much cut in their salaries. It’s their way of looking after the team..
So, the important thing now is:
Stay safe, practice good hygiene and social distancing.
TELL your friends and family to take it seriously, even if they are healthy and if they meet their friends then come home, they will likely spread it to their parents and family.
Stay positive, it will get better, together we can get through this as long as we keep working hard, together as a team. I’m here for you.
We hope this was helpful and saved you both time and stress in formulating a pretty difficult interaction. If you have any questions please feel free to comment or ask. We encourage you to share this with people who might need this, business-owners and decision-makers and hopefully we can curb mass lay-offs and business failures during the Covid Crisis.
The Idea has committed our consultants to pro bono support of SMEs during this period to businesses from failing which lead to layoffs, and to help direct donations, manpower and other resources for those in need. Please contact us if you’d like to learn more.