Money and Main Street

Get your old salary back!

In a welcome move, more employers are reversing pay cuts, or planning to in the months ahead.

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By Jessica Dickler, CNNMoney.com staff writer

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William Stickney, here with his fiance, said there is a lot of good will at his company after salaries were restored.
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NEW YORK (CNNMoney.com) -- Back in April, William Stickney got some unwelcome news. His employer was cutting his salary by 10%.

His company, digital communications firm Horn Group, tried to cushion the blow by offering additional days off and promising to reinstate pay by October.

Stickney, a 27-year-old senior account executive, saw the move as a way to avoid layoffs. But the smaller paychecks were still a hard pill to swallow. "The hardest thing was the day-to-day budgeting," he said. "I tried to think of things that would save little bits of money."

But in early September, he and his colleagues were stunned to find out that the company was restoring salaries as promised -- one month ahead of schedule. Stickney was thrilled, and saw it as "a sign of good things at the company."

In perhaps the most concrete evidence to date that the recession is abating, workers like Stickney are getting their salaries restored after enduring painful pay cuts over the last year.

General Motors and Advanced Micro Devices are just a few of the companies that have recently announced they are restoring previous salary levels as economic conditions begin to improve.

Detroit-based GM had cut salaries for white-collar workers in the United States by between 3% and 10% in May. The move to reinstate pay went into effect at the beginning of September.

AMD (AMD, Fortune 500) announced pay cuts between 5% and 20% back in January. Those employees affected will see their paychecks bumped up in December.

Hard drive maker Seagate Technologies (STX) is also restoring pay for all employees below the vice president level who've shouldered a 10% cut since January.

Other companies, like FedEx (FDX, Fortune 500), are showing signs that they might follow suit.

"If the global economy improves ... and if FedEx volumes improve, then in 2010 FedEx will begin reinstating some merit-based pay increases and 401(k) matches for U.S.-based employees," said Jess Bunn, a spokesman for the company.

According to a recent survey by consulting firm Watson Wyatt, 44% of employers said they plan to roll back salary cuts in the next six months, up from only 30% two months ago. Thirty-three percent of employers that froze salaries plan to unfreeze them, and 24% of employers surveyed plan to reverse reductions to 401(k) match contributions in the months ahead.

Making amends with employees

After a year marked by widespread layoffs, demotions and pay cuts, reinstating salaries is one way to reengage employees in the business, said Ravin Jesuthasan, a managing principal at Towers Perrin.

AMD spokesman Brenda Rarick called the move "a morale boost."

Pay cuts can be a quick solution for companies in turmoil, Jesuthasan said, but can also damage relationships between employers and employees.

"Companies are increasingly aware of the fact that as the economy recovers they want to make sure that people stay on with them," Jesuthasan said.

One company that has done that is Acco Brands (ABD), based in Lincolnshire, Ill. Employees at the office supply maker saw their pay slashed by a whopping 47% for six weeks earlier in the year, in addition to a mandatory furlough and other cuts.

Richard Nelson, a spokesman for the company, said the pay cuts were necessary, and even if employees didn't realize it at first, the move was in their interest. "Salary reductions preserved a lot of jobs," Nelson said.

Not only will the employees affected by the pay cuts be brought back up to their old salaries, but now that the company is faring better, they will receive a 5% pay increase in 2010, to help make up for the loss of income.

"Over the course of the next two years everyone who participated will be fully reimbursed for their sacrifice," Nelson said. To top of page

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