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Cutting salaries is usually devastating for a company. Morale drops to zero and the good people leave.
The only time it is likely to work is either when conditions are the industry are bad and everybody is doing it, in which case the staff have nowhere to go, or when it is carefully handled by the management. If the staff of a small company trust the management and have been kept informed of developments, then a temporary salary cut, when properly used and properly understood by the staff, can be a useful way of getting through a short-term crisis.
B. No I think this not solve to cost minimization because when you have a small staff and a lot of business in a short time most completed so this leads to a lack of business success .
It depends on the company culture and the employees' dedication. If employees sit around a table with higher management and feel free to share ideas and be open, chances are that they might understand the situation and accept it.
But of course there should be a certain target that needs to be reached to higher up the salaries again and this is something all employees should be aware off. So they should get rewarded also for accepting the lower salary temporarily.
Firstly we need to understand basics of Salary reduction in a running company. These include below reasons for such a drastic action;
1. Business is too low.
2. Additional competition, this may be due to work being offloaded to overseas offices.
3. To please share holders and to increase company's profit numbers.
4. Lastly the economic situation of the given country.
Hence it is never one answer, but if one doesn't want to face salary cuts due to any of the above reasons can opt to quit but need to exercise caution. Generally salary cuts would not bring down the company's Quality or Performance.
If the particular company is bent upon competing or on survival mode would surely go to salary cutting options.
Salaries and wages are the longest cost of the company, which are difficult to control. The following tips will lead you through a difficult, though necessary process to ensure your company is positioned to survive and thrive in any economic environment
1. Review Levels of Compensation
2. Reduce Employee Turnover
3. Cross-Train Employees
4. Trade Time Off for Payroll Expense
5. Share Jobs Between Employees
6. Convert Fixed Salaries and Wages Into Commissions or Fees (Salesmen commission)
7. Reduce Perquisites
8. Automate and Outsource Non-Critical Tasks
it is depends on economic situation and your industry sector situation, if this is the case in the sector (this company and other companies) and there is a recession , thus the employees have no options and they will understand and may accept it.
but if the company trying to fix management misuse of resources by minimize the salaries ,it will increase the problem and may lead to leakage of employees.
