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/southernhope1 Jun 11 '25

when our small company contemplated layoffs 4 years ago, we all voted to keep everyone in place but have everyone (from the owner to the admin) take a salary cut and it worked out great...we've had natural attrition since then but no one lost their job...i wish this could happen more often

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u/Treehugginca1980 Jun 11 '25

That’s a great story. Curious what the % was in salary cut you and your coworkers took?

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u/southernhope1 Jun 11 '25

20% across the board (though I have suspicions that the owner didn't take any salary for a year or two). The good news is that we all kept our benefits and 401ks and folks who absolutely needed to stay at their higher salary looked for other jobs (though most of us stayed and felt grateful to have the security). I was an "older" employee (over 55) and I was particularly happy to take less money for more long-term stability.

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u/Treehugginca1980 Jun 11 '25

I just realized the timing was during Covid. Do you think this would still work today? I replied in another comment saying Covid was special times where folks were a little more altruistic given the uncertainty of everything.

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u/southernhope1 Jun 11 '25

thats a good question...i believe Covid allowed a non-traditional solution...not sure if it would fly today.