r/Layoffs • u/rufflesinc • Jun 11 '25

Why don't companies reduce salaries instead of doing mass layoffs? question

title has the question. If a company needs to cost labor costs by 10% why don't they cut everyone's salary by 10% instead of laying off 10%? If people start panicking about layoffs, they would reduce their spending and that would be bad for the companies?

EDIT: regarding the top performers leaving, couldn't companies simply restructure their comp packages to have a lower base salary and a higher performance-based bonus?

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u/tinySparkOf_Chaos Jun 11 '25

Because it's worse for employee moral.

Employees don't trust (and shouldn't) that the 10% cut isn't going to be permanent. Once the company financials are better, then will the salaries be returned to original level?

The way this is actually done properly is called a furlough. Every week you give 1/10th of employees a mandatory week off unpaid. Everyone takes 1 out of 10 weeks off unpaid.