In 2007, 5% of the companies in the U.S. reduced salaries of current employees. They also slashed working hours, benefits and early retirement options in an attempt to avoid bankruptcy and put their companies into the black financially. According to some experts, in the coming months many employers will consider reducing employee salaries by 10% to 20% as they search for ways to trim costs and avoid bankruptcy and permanent job losses .
A 10% to 20% pay cut? Who is ready for that? Most of us aren't prepared for such a drastic decrease in our earnings, even if it will help the company avoid bankruptcy. With drastic pay cuts threatening many workers, we are set to see a dramatic increase in personal bankruptcies and foreclosures.
It's a slippery and dangerous slope for workers because if an employee is forced to take a pay cut that pushes him/her toward financial disaster, if he/she quits, will they be eligible for benefits such as unemployment insurance? Probably not, so there will be no financial cushion if employees are forced to quit because of "unlivable wages."
Many of us have worried about job losses but the pay cut monster can push families closer to the edge of foreclosure and default on their other loans such as credit cards. Every worker needs to prepare themselves for the possibility of salary cuts.
What will you do if your boss asks you to take reduced pay by 20%? This is something you need to think about now, before it happens. Prepare now for what could happen at your workplace. If you are drowning in debt and barely staying ahead, just imagine what your financial picture would look like with a 20% pay cut.
If you suspect that your company may implement drastic pay cuts speak with a bankruptcy attorney to find out what steps you can take to protect your family's finances using bankruptcy.