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February 20, 2009

Silicon Valley’s Next Big Innovation: Pay Cuts

Silicon Valley’s Next Big Innovation: Pay Cuts.

Cutting 5% pay or lay folks off… HP made the right choice.

Also an interesting quote from the story:

MIT economist Martin Weitzman suggested in the 1980s that instituting pay cuts instead of layoffs could make recessions shorter and less painful. By setting base salaries lower and making pay more variable with a business’s financial results, companies could avoid cutting jobs and increase workers’ rewards in good times. HP is trying exactly that, with a change to its bonus plans that could make up for the pay cuts if times do well.

I’d take a job where my sallary was more flexible but rewarded when the company was doing great – I’d also be willing to accept a pay cut to help retain the quality people I work with. It makes so much sense… far too simple to be implemented by anyone.

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