Same job, less pay

Forget a raise. Some employees will actually be making less this year than they did last year.

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By Jessica Dickler, CNNMoney.com staff writer

How will the Obama stimulus proposal affect the economy?
  • It will end the recession quickly
  • It won't end the recession, but will soften its impact
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NEW YORK (CNNMoney.com) -- An annual 3% raise used to be considered stingy. Now, some employees will be happy if their salary doesn't go down in the coming year.

It's not just Citigroup executives that are seeing their compensation cut. More companies are considering salary reductions as a way of cutting costs amid an ongoing recession.

"Companies are looking for ways to keep their business intact without hurting customer service or quality," according to John Dooney, manager of employment and HR strategy for The Society for Human Resource Management (SHRM). "This is a potential option."

In the last 12 months, 5% of businesses reduced salaries, according to a recent survey by SHRM. Other cost-cutting measures included reducing work hours or benefit offerings, early retirement options and salary freezes.

In the months ahead, many more employers will consider salary reductions of 10% to 20% as a way of trimming costs in turbulent times, according to Jo Prabhu, CEO of staffing firm International Services Group.

"Companies have to cut costs. If they don't do that they'll go out of business," Prabhu said. "Both the employer and the employee have to accept it as a fact of life."

For workers though, a salary reduction is a hard pill to swallow, even in a recession.

The No. 1 concern for 69% of American workers is keeping their job, yet only 17% would be willing to take a pay cut to keep their job, according to Adecco USA Workplace Insights survey.

A married mother of two, Tiffany Mason, 37, was working for an airline as a recruiter in Orlando when her employer announced paycuts across the board.

Even though "it was a job I truly, truly loved, at the time I just couldn't take that cut," Mason explained, "I was already living paycheck to paycheck."

Mason decided to quit and now works as a recruiter for a small information technology firm. She says the job is relatively stable but, because of the current climate, she fears for the future.

"I am scared," she said, "I hustle everyday to think of ways to save the next penny."

Michelle Schahn, 37, said that when her husband Steve's salary was cut 20% last year, it meant that the stay-at-home mother of four had to go back to work.

"It's really frustrating when you work very hard to make it on one income and then you suddenly can't," she said.

Even though she says that his job as a project manager at a concrete and masonry company is secure, and her part-time employment as an office manager helps makes ends meet, the Schahn family still had to cut back a lot.

"We're making it work, but it's really difficult," she said.

Employers share that sentiment, said Bernadette Kenny, chief career officer of placement agency Adecco Group North America.

"The first thing every employee should know is that organizations don't like to do this," she said.

"This kind of approach of attempting to retain employees as opposed to layoffs is a new phenomenon," Kenny said. "Organizations appreciate the talent that they have and are doing everything they can to retain that talent."

Are you unemployed and using unconventional methods to find work? Tell us about it, and you could be included in an upcoming story.  To top of page

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