Employees are working harder than ever to retain their jobs, working for lower salaries, slashed bonuses, vanishing employer 401(k) matches and higher health insurance costs. Others have had to tap into vacation or sick days instead of being furloughed, or as a sacrifice to the bottom line.
A Westchester woman (who asked that her name not be used) was laid off via text message back in March and then was rehired three months later into the same support role — working from home with a 25 percent pay cut and minus the company’s 4 percent contribution toward her 401(k). “It’s a big cut in my budget,” she said.
Pay cuts aren’t anomalies. According to the outplacement firm Challenger, Gray & Christmas, a recent survey of HR managers revealed that one in three companies has cut employee pay during the pandemic. And according to Mercer’s COVID-19 spot survey, nearly half of employers may make changes to their health benefit plans during annual enrollment this fall.
But Roy Cohen, a Midtown career coach, said that “I have never worked with a client who did not get upset when their salary was cut.”
Cohen suggests asking management about the time frame and conditions when your full salary will return.
“Knowing that the cut will be contained and that the company is committed to your well-being removes some of the uncertainty tied to your financial security and your wherewithal to make it through this rough patch,” he said.
Those business decisions are tough, but also legal, “so long as the employer puts the employee on notice in advance of the reduction, and prior to the employee performing any work during the pay period in which it takes effect,” said Mark Kluger, co-founding partner of employment law firm Kluger Healey LLC in Fairfield, NJ. “The exceptions are if the employer has a collective bargaining agreement with a union or an employee has an employment agreement.”
Employers may also reduce workers’ hours to avoid layoffs or furloughs.
“Whether or not this is a viable solution depends upon a number of factors,” said Cornelia Gamlem, co-author of “The Big Book of HR,” (Career Press). “Such as, the type of work and the industry, the type of establishment (office or retail, for example) and whether employees are hourly or salaried.”
Employers should focus on morale and consistent and transparent communication.
“Companies that show empathy toward their employees will send a strong message about how much they value them,” said Gamlem.
That script may want to highlight this temporary period so employees can adjust.
“For the time being, that [salary cut] seems to be a small price to pay for a stable job, especially if their company promises to restore this benefit once we return to a new normal,” Cohen said. “If they [employers] don’t follow through on their commitment, then you have reason to begin an active job search.”
If you work for a company that slashes your health coverage or if your out-of-pocket costs skyrocket, you may want to explore coverage through a broker who represents a number of insurance companies, or through the health care exchange. The Affordable Care Act (aka Obamacare) makes plans available to everyone whether or not your employer offers insurance, though you may not qualify for subsidies. Open enrollment runs from Nov. 1 to Dec. 15 of each year, but you can enroll anytime after losing a job or other life events.
Gamlem said that employers evaluating their plans should consider encompassing telehealth within their plans, which often expands the employees’ access while being more affordable.
“Be sure that telehealth is included with your health care coverage,” she said. “Telehealth is very effective in reducing costs.”
Meanwhile, managing your downsized wallet presents challenges. Although you’re saving money from the commute, child care and dining out, your bills may inch higher for take-out, groceries and utility bills. Experts weighed in on how to cope.
Have a money party
Ashley Feinstein Gerstley of Hoboken, NJ, money coach, founder of feminist money platform the Fiscal Femme and author of “The 30-Day Money Cleanse” (Sourcebooks) said this is an opportunity to revisit budgets during a “money party.”
“A money party is time I set aside to look at my spending and tackle any other financial to-dos,” she said. She recommended having them at least monthly for around 90 minutes. Enter expenses into a spreadsheet and check on monthly progress toward goals.
You might be able to negotiate rates on things like Wi-Fi and cable. And, “definitely keep up to date on government COVID relief available,” said Gerstley. “If you have federal student loans, you now don’t have to make payments through the end of the year.”
Take charge of your credit cards. Leslie Tayne, founder and head attorney of Tayne Law Group in Midtown and author of “Life & Debt” (Gateway Bridge Press), said, “If you’re struggling to make
payments, contact your creditors and ask them for lowered interest rates or other assistance. If you put your credit cards into deferment, it won’t help you reduce your debt, but instead delay them until a future date. Pay off day-to-day expenses and then tackle the debts where creditors are more flexible.”
Get rid of any excess
Eliminate unused software or entertainment subscription services which auto-renew. “If you haven’t used it in three months, cancel it,” said Tayne.
Lower your voluntary payments
Temporarily reducing retirement contributions is strategic when money is tight. Also, “faced with no other options, individuals can withdraw or borrow from their retirement account without penalty under the CARES Act. Still, funds taken out will be taxable income.”