How to Manage A Pay Cut During COVID-19 Crisis Photo: Shutterstock

How to handle a salary cut during Coronavirus pandemic

Isola Moses | ConsumerConnect

All are affected by the new development, both in the public and private sectors of the economy.

Indeed, one of the overwhelming effects of the ravaging Coronavirus (COVID-19) pandemic on individuals and organisations worldwide has been the sudden reduced income, pay cut or layoffs as well as contract or project agreement reviews by organisations seeking to lower costs and stay afloat post-pandemic cum lockdowns.

While some organisations have decided lay off workers in response to the stifling Coronavirus pandemic in order to survive in the emerging business climate, others have actually decided to cut salaries of employees.

Even as American employers let tens of millions of workers go, some companies are choosing a different path, reports The New York Times.

By instituting across-the-board salary reductions, especially at senior levels, they have avoided layoffs.

The ranks of those forgoing job cuts and furloughs, report says, include major employers such as HCA Healthcare, the hospital chain, and Aon, a London-based global professional services firm with a regional headquarters in Chicago, United States. Chemours, a specialty chemical maker in Wilmington, Del., cut pay by 30 percent for senior management and preserved jobs.

Others that managed to avoid layoffs include smaller companies like KVH, a maker of mobile connectivity and navigation systems that employs 600 globally and is based in Middletown, R.I.

In Nigeria, a company executive in the Central Business District CBD) of Abuja, Nigeria’s Federal Capital Territory (FCT), in a chat told ConsumerConnect that instead of receiving condemnations for slashing his workers’ monthly pay by 50 percent, he woke to an outpouring of support from employees that left him elated.

“Though the Management understands the socio-economic implications of this unexpected decision on the finances of the affected staff, it was not an easy decision for those that have stayed with you for some time in building the brand.

“But it turned out to be the best day of my life at work,” he said.

And for employers of labour, certain human capital specialists have said that a no-layoffs policy also builds loyalty in an organisation.

“No one wants to be in a situation where their salary is cut. But we really do believe the way you treat employees today is the way they’ll treat you tomorrow,” posited a company chief executive.

ConsumerConnect investigations also revealed that other Nigerian employees, especially teachers most of whom have been engaging in virtual (online) teaching during the Coronavirus crisis said their employers mostly, have reduced their salaries between 30 and 50 percent, even as the Federal Government fine-tunes strategies for reopening of school, colleges and universities across the country.

A cross-section of affected teachers and other employees in separate interviews in Lagos, Abuja and Port-Harcourt stated that it is yet better for them to accept a pay cut than to settle for outright lay-off from workplace amid the worsening inflation in the country as of now.

Therefore, if you suddenly find yourself taking home less than you’re used to in this period, consider these top helpful tips to assist you in finding a balance, according to RealisingAmbitions.

Likewise, if you’re among the lucky few who won’t have a reduced income, using these tips to stay cautious with your spending will help you easily navigate the potential high cost of living brought about by the persisting pandemic.

Create a monthly expense list

The first step is to create a new expense list based on your new salary. When building your new expense list, ensure to list the needs and wants in separate columns. This helps you to identify areas that you can cut back on more easily.

Slash spending

If possible, try cutting your clothing, entertainment, and food spending by 10% across the board.

Making these types of cuts enables you to find the money that you need without heavily cutting back in any one area.

One way to categorise where you can cut back is to try less expensive alternatives to some of your traditional spending habits.

It helps to work with a budget number in mind. Let’s assume that you have an income shortfall of N50,000 per month.

Knowing this number gives you an idea of the exact amount you need to trim from your budget and also helps you prioritise your expenses.

Identify ways to save on necessities

You may want to consider scaling back on your cable TV bouquet to a cheaper option, reducing your internet cost and petrol usage for your generator.

Although the savings may not be huge by cutting back on only one area, the combination may be enough to help you save money.

Look into finding more affordable car insurance and find less expensive alternative shopping centers for your groceries.

Don’t suspend your savings

Take a look at your financial goals and find a way to continue to save money. If you make a direct debit when you’re paid, it will be easier to keep saving because now when you’re dealing with an emergency is when you need to have savings to rely on.

Develop yourself

  • While you utilise the above-mentioned suggestions, consider:
  • Keeping up with certifications so that you can easily find another job
  • Exploring alternative income streams
  • Learning a skill that will position you for the future

Experts say it takes discipline to handle a pay cut because you may have gotten accustomed to certain lifestyle expectations.

Nevertheless, it is important to understand that this is a phase that will eventually pass, and your ability to effectively manage your finances now will help you manage it better when things stabilise and your earning power improves again.

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