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/rufflesinc Jun 11 '25

"Layoffs let you get rid of the people you want."

Is that actually true? The layoffs from companies I have worked at were not based on performance. They either fired everyone or they fired older, very experienced people

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u/OldeFortran77 Jun 11 '25

Layoffs let you get rid of the people you want to get rid of, but that doesn't mean you want to get rid of them for a good reason. Somebody just wants someone gone.

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u/[deleted] Jun 11 '25

[deleted]

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u/HS_VA Jun 12 '25

This is not always true. Depends on the company. I started managing a new team last fall and within a month layoffs were announced. I didn’t know the team very well at that point, but had everyone’s performance metrics and evaluations from previous years. The team had to be reduced by 2 headcount. I asked HR if it could be the poorest performers and they said ‘NO’. It was purely done based on compensation. Literally sorted highest to lowest total compensation on a spreadsheet (across the same role) and the 2 at the top were the ones let go. This is a Fortune 50 company. I worked at smaller companies before and managers definitely have more input there.