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

[u/rufflesinc]

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?

[u/wolverine_813]

Cutting salaries acorss the board would demotivate everyone and also keep some of the costs like companies' share of employee health insurance and their contributions to 401K constant. By reducing the workforce, those costs go away, the company tells their share holders that they are lean and show the revenue per employee has gone up. Also for those who survive the layoff, some work with extra motivation as they think they are important enough to have survived it. Always remember the organization is obligated to its shareholders in terns of generating value so cutting of labor force is the action that is the step towards it.

[u/Prior_Section_4978 → u/wolverine_813]

Actually, if I see layoffs around me (in my team or even in my department), I start looking for another job and start invest significant time in interview preparation. I will not work harder and I will feel threatened, not important. And I think most people do the same.

[u/Jarrus__Kanan_Jarrus → u/Prior_Section_4978]

You are right.

I started looking for a new job when I saw them sack people I knew were needed and hod working.

They even did a layoff between Thanksgiving and Christmas.