Paycut Reduction or Lay Offs?

[DawnCt1]

The following is a letter written to the Hartford Courant this morning by a reader who was reacting to news that Foxwood Casino is planning to lay off 700 workers. His answer to the problem is to "share the pain". Foxwood would then keep 700 workers who really wouldn't be working, otherwise they would be needed. The retained workers would be working for less money. I am sure most workers need the amount of money in their paychecks. Would you be willing to give a percentage of your pay to retain all of the workers in your company? Your thoughts.


One of our state's casinos summarily fired 700 people on Tuesday [CTNews, Oct. 1, "Foxwoods Planning To Cut 700 Workers"]. Surely, as the nation's financial crisis deepens, thousands more will lose their jobs.

Evidently, the people who run our corporations are incapable of finding another way to meet the challenge of declining revenues. In every recession, their response has always been to fire hundreds and sometimes thousands of their fellow employees. Apparently, most business leaders lack the imagination and the creativity to find a better way to reduce costs.

But there is a better way.

The fairest and most humane way to reduce costs would be to make a temporary salary reduction for every employee in the company — from the CEO down to the people at the bottom of the pay scale. Everyone would sacrifice equally.



Everyone would suffer somewhat. But everyone would keep their jobs. Then, when the economy revives, salaries could be increased to their former levels.

I wonder if there is any business leader with the vision and the courage to take such action. I doubt it.

.Granby

 

[Chicago526]

I think it would depend on the amount of the cut. If it was a 10% cut, I'd be willng to take one for the team. If it was a 40% cut then I'd say layoffs are a better way to go. Let's face it, with a 40% cut most people would be out looking for new work anyway.

 

[Jennasis]

I bet a decent sized paycut for CEO's and upper mgmt would result in the sparing of more than a few jobs. HOwever a Foxwoods might be a bad example. Who, in their right mind, is taking a vacation to monetary gambling destination with the economy the way it is right now? Heck, if my trip wasn't paid for, No WAY would we be going to WDW this December.

THAT trip was paid for with our economic stimulus money.

 

[Aisling]

Would you be willing to give a percentage of your pay to retain all of the workers in your company? Your thoughts.

Well, all the people who are in favor of the government bailout of the financial institutions would answer YES to your question, as that's basically what's going to happen. We the taxpayers will be paying that $700 billion dollars so that others don't lose their homes/investments/jobs.


But sticking with your question, I answer no.

 

[BillSears]

The biggest problem I see with keeping all employees and reducing salaries is that your quality of employees will go down. Reducing jobs gives you a chance to remove the deadwood from the work force while encouraging those still employed to keep up the good work that they are doing. Reducing salaries keeps the deadwood and some of the good employees will feel disgruntled at the lower pay scale and therefore they will not work as hard.

 

[DISUNC]

Depends. If I was gonna be the one to get laid off...I'd say pay cut!

 

[luvmy3]

This may sound heartless, but no I would not take a paycut. I think that there are many people who worked very hard to get where they are and make the salary they do. Those people are accustom to living on that salary. I'm not talking about over their means, but they are able to pay their bills and plan for their future. They should not have to change any of that.
I use my dh as an example. He was poor growing up. He paid his way through college and grad school t to earn his PhD, there is a real good reason he makes the salary he does. His company feels that he is an asset, and in turn he makes them money. Its not his fault that others are not as fortunate as him, and he shouldn't have to pay for it.

This is the way life is, I don't expect because someone is rich and successful that they have to help anyone out. We all have the potential to better our lives, and shouldn't be penalized for doing so.

 

[DawnCt1]

The biggest problem I see with keeping all employees and reducing salaries is that your quality of employees will go down. Reducing jobs gives you a chance to remove the deadwood from the work force while encouraging those still employed to keep up the good work that they are doing. Reducing salaries keeps the deadwood and some of the good employees will feel disgruntled at the lower pay scale and therefore they will not work as hard.

I agree. Reminds me of the old Soviet/Russian saying; "We pretend to work and they pretend to pay us". My answer would be "no" as well, particularly given the nature of the casino business.

 

[disney junky]

Just curious, but how big is this casino and how many people total people work there? Are these mostly part time jobs?

 

[DawnCt1]

Just curious, but how big is this casino and how many people total people work there? Are these mostly part time jobs?

From Foxwood's website. I have only been there 3 times. Twice for a private party, and the third time for dinner. There are 11,000 employees. They cut 200 jobs in June. This 700 are in addition to that.

Overview

In 1986 the Mashantucket Pequot Tribal Nation opened the original high-stakes bingo hall. Today Foxwoods comprises six casinos that collectively offer more than 7,000 slot machines and an incredible 400 tables for 17 different types of table games, including 100 for poker. There's a luxurious, high-tech Race Book, as well as the world's largest Bingo Hall.

Foxwoods is the largest casino in the world, with 340,000 square feet of gaming space in a complex that covers 4.7 million square feet. More than 40,000 guests visit Foxwoods each day.

Contact Us

Accommodations at the resort total 1,416 guest rooms and suites, including the 824 room Grand Pequot Tower, 312 room Great Cedar Hotel and the 280 room Two Trees Inn. For conventions and group events, Foxwoods features more than 55,000 square feet of meeting space and 25 conference rooms.

MGM Grand at Foxwoods has added nearly 2 million square feet of overall space, featuring significantly increased hotel, entertainment, restaurants and gaming venues as well as enhanced corporate retreat, meeting and convention resources.

It will add nearly 2 million square feet of overall space, featuring significantly increased hotel, entertainment, restaurants and gaming venues as well as enhanced corporate retreat, meeting and convention resources. The project will also positively impact the local employment landscape, with 2,300 new jobs expected to be generated.

 

[RitaE]

I've seen a couple of companies try similar things. In the short-term, it sometimes works out. This is true in instances where the company is facing a short-term set back that is expected to resolve itself.

Often, the employees that are worth their full paycheck amounts via qualifications and skill simply go to other businesses that will pay them their full worth. The company loses most of their best employees, and they are left with the workers who have no other options.

 

[shelly3girls]

The whole idea seems rediculous to me. If business is down and they do not need as many employees to meet the needs of their customers then they need to cut back on the staff. It is unfortunate for those who lose their jobs but why should they just have people around with not enough work to fill their time?

 

[OrlandoMike]

Maybe they could cut back on some of the money they give to the state of Connecticut?


The casino agreed to pay 25% of their slot revenue to the state of Connecticut, a sum that now amounts to almost $200 million per year as of 2007

 

[mamacatnv]

Its good in theory but most employers will tell you that the salaries are only part of the costs. The taxes and the benefits are huge burdens for companies.

My DH's company has announced 20% layoffs - he has a ton of senority and so hopefully is way down the ladder for consideration. My concern is of course his paycheck, but my bigger concern is the loss of benefits his employer provides and that we all use.

 

[asta]

In a well run company with executives worth even a fraction of their pay, they should be able to take their investment in the company which includes a sizeable investment in human capital and look for other areas where they can make a return on their investment. When a company looks at laying employees off, it means that they are either in a truly dying industry for which there is no way out but to continue to cut until they are dead or the upper levels do not have the skill to invest in other profitable endeavors. For too long American companies have been following the advice of people like Jack Welch who teach executives how to get rich by cutting back on their business. Not all employees are dead weight. Someone thought they were worth hiring and in many cases a lot of money has been invested in training them. The real call should be for these companies to be looking for new ways to make money.

 

[tedhowe]

Remember that Human Resource Management is a specialized area of study/business.

If it was more effective/more profitable in the long run to retain all employees and reduce their pay, then that would be the standard practice.

Since it is not, I would have to say that the "best" course of action is to proceed with reasonable layoffs and focus the layoffs on the positions that are most expendable. Every endeavor, whether it is simply finding food to eat, going on a vacation, or staffing a company has necessities and luxuries.

When times are hard, luxuries are reduced or eliminated. That applies to human resources as well.

As someone else pointed out, reducing salary will quite possibly cause some of your highest performing "necessity" employees to look elsewhere for work.

 

[bicker]

I bet a decent sized paycut for CEO's and upper mgmt would result in the sparing of more than a few jobs.

Nope. Fractional percentages, at best. And it would only provide incentive for the upper management to abandon ship, leaving the company in less capable hands.

 

[EthansMom]

The whole idea seems rediculous to me. If business is down and they do not need as many employees to meet the needs of their customers then they need to cut back on the staff. It is unfortunate for those who lose their jobs but why should they just have people around with not enough work to fill their time?

I agree with this. Given the economy, there are fewer people gambling and fewer people doing long-weekend-type trips to Foxwoods. Therefore, they don't need as many employees as they currently have.

Also, if you decrease pay across the board for employees, you risk having some of your better employees leave for other opportunities that pay better. Most companies use a first round of layoffs to rid themselves of the least efficient and/or redundant workers. A well-planned layoff can actually make a company more efficient and more profitable.

 

[bicker]

As someone else pointed out, reducing salary will quite possibly cause some of your highest performing "necessity" employees to look elsewhere for work.

Absolutely. That's why, in such circumstances, very often across-the-board pay cuts will quietly be followed by targeted bonuses and reversals of the pay cuts, for staff the company considers too valuable to face the prospect of replacing. The "across-the-board" legend is often more fiction than fact: rational and responsible business decision-making won't let it stand. And where external forces force it to stand, you can be sure that it harms the overall enterprise, long-term.

 

[tedhowe]

Remember, too, that salary only accounts for a portion of the total cost of employing people.

Cutting salary does nothing to reduce benefit costs, only marginally reduces the employer portion of payroll taxes, does little to nothing to change the cost of office space rent/utilities,etc.