When is it OK to take a pay cut?

This subject is pretty much a taboo to bring up as a recruiter. But based on my 12+ years of recruitment experience, and having worked through ever-changing and evolving markets, I don’t think this should be off-limits at all, and I don’t think we should avoid the discussion.

I have myself placed a few senior talents in the last 12 months at a pay decrease – but every one of those candidates, if you went back to them today, would tell you the upside of the packages they signed, as well as the excitement of a successful change in career direction, and a better work-life balance.

So, especially when you find yourself in a rapidly changing market, or when you’re making a career shift, you could find yourself discussing a pay cut.

Here are some guidelines on the When, Why, and How of taking a pay cut…

When?

When you are trying to shift gears: I don’t think there has been a day in my life as a recruiter when I haven’t heard someone say, “I want to do something different!”

Great! But here is where that conversation also ends – “But I want a 10-20% pay raise for this.”
Well…not so great! Why not?

It’s simple. Would you hire someone to work for you and pay them 20% above their current salary to do something where they have limited or potentially zero experience or knowledge? Probably not, right?

But you might respect that person’s skills and experience enough to want to have them onboard. It’s only natural that if you’re hiring, you need to feel like you’re making a wise investment, so the process involves ‘give and take’ on both sides.

When you’ve been job hunting for a little while, and/or you notice a ‘trend’ in the offers you have received: You may have been to meetings, either at a company or with a recruiter, where you’ve been told the amount you want is unrealistic, or would be very tough to achieve. And I bet that touched a nerve and you dismissed the person telling you as disrespectful, or even not particularly great at what they do. But the truth is most of these people are specialists in their markets and their roles, and they know a thing or two about what you can achieve. I tell my candidates they should especially pay attention to this if they’ve heard this more than three times over a short period.

More than often people want to move jobs for a lot more reasons than just money and whilst they know it, as humans, it’s only natural to not admit it or tuck it under the carpet and focus on the one thing- pay rise!  Perhaps revisit those reasons, and see if this new offer makes up for 80% of your other reasons to want a change.

When you think your job is at risk, or have been made redundant: Particularly if you’re in the banking industry, cost cuts and strategy shifts are inevitable. In 2018, I have seen more senior talent than ever in the market because of restructuring and/or innovation. If you have been in the market for over six months, or seen very few roles/interviews/offers come your way, it’s maybe time to rethink.

Why?

Because the market is changing or changed: Businesses these days are more cost conscious than ever. Compensation and benefit teams dig deep and must adhere to standardization along with cost effectiveness. If you have worked in a market where there were sharp pay rises, added perks, expatriate packages and the like, then you have been truly lucky. That trend, sadly, has changed. With increasing technological innovation and increasing roles of AI, human talent needs to adapt to the changing landscape.

Because you are not the ONLY ONE: Harsh but true. As a recruiter, I do firmly believe that we are able to do what we do because of a shortage of talent in the market. But as contradictory as it may sound, there is competition. Look around in your own organization and gauge if there is anyone else around you who does the exact same job you do, or has the experience or ability to do your job. Then you have to consider, there is always an ongoing rush of overseas talent who will leap at the next opportunity that lands them in Asia. Basically- there IS competition. No matter where you are or who you are.

Because sometimes you have to take two steps backward to leap six steps forward: To quote Sheryl Sandberg about why she joined Facebook as COO, when other bigger names back then were willing to hire her as CEO – ‘At first people questioned why I would take a “lower level” job working for a 23-year-old. No one asks me that anymore. As I did when I joined Google, I prioritized potential for fast growth and mission of the company above title’.

We all know where that took Sheryl!

How much, and How to?

Depending on your level and the opportunity on offer, a cut could be anything from 10- 40% lower than your last role. I have predominantly been a Banking & Financial Services recruiter for the major part of my career. Most recently I have come across several of my contacts from back in 2006/7/8, who are looking for a “change”. Unfortunately, their roles are almost non-existent at other firms, or will never be available until an incumbent leaves. And, sadly for them, their internal pay rises haven’t been stellar either (ever wondered why?). So why not embrace something new?

Negotiate, and look at the bigger picture: If you are taking a cut to move into a new role or make a career shift, negotiate around other things to help you compensate for that “loss” or “risk”.
Questions to ask:

Can they consider a pay rise in 6-8 months?

Particularly if the company is a start-up, can you buy or earn shares?

Can you get a small sign-on bonus of some sort, can they fast-track promotions as you prove yourself, and can you get additional training?

Get your foot in the door: If a company is investing in you, especially if you do not have direct or 100% relevant experience in the area/function/region/role, then they are taking as much “risk” as you are. Use the opportunity to get your ‘foot in the door’ and gain the experience in something that will take you into the future.

Remember the little details add up: Ask yourself if what you’re getting overall is a better work life balance, a more relaxed work culture, and better holidays?

To be clear, my intention is not to say that you MUST take a pay cut if you want progression. And please do not view this article as negative either. I recruit a lot within boutique and growing companies, especially Fintech and related spaces, and have made placements at pay decreases. But as I said above, those candidates and clients placed into those roles will stand testament to some or all of the above

And in saying that, 90% of my and The Edge’s placements have been at average pay rise of 20% 🙂

So, if you are looking for real change, for something different, feel free to get in touch with one of us at www.theedgepartnership.com

I am always available for a coffee and chat!