Hello Everyone: I just read that the owner of the Philadelhia 76ers and New Jersey Devils is considering a pay reductions for salaried employees (over $50,000 annually) up to 20%. 

My question is if companies are considering a "tiered reduction" approach, what are the tiers and percentages?  For example is a tier setup as follows reasonable: 

• Salaried employees earning $50,000-$75,000: 5% reduction
• Salaried employees earning $76,000-$100,000: 10% reduction
• Salaried employees earning $101,000-$125,000 15% reduction
• Salaried employees earning $125,000 20% reduction

This is just an illustration for discussion.  Please let me know your thoughts.

Thanks and be well!

We considered something similar to this, but we planned to align the tiers based upon our internal classifications (ie: Executives  70%, Salaried Exempt 75% ). We were modeling an extreme, and the math works out that 70% is the lowest we could go for exempt workers without dipping below the $684 threshold for exempt status.

We also had some discussions around what meets the 'bona fide" criteria listed in #7 from the WHD/DOL fact Sheet #70 

https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs70.pdf

After much discussion, we have not made any reductions at this point. An (unconfirmed) news article listed a local company plan to cut Exec's to 40% and remaining Salaried Exempt to 50% for the month of April.

We are based outside the US and have implemented a tiered pay reduction for a period of 3 months. It applies to professional and managerial levels only and is between 10% and 30% of their basic salary. Thee total monthly salary is made up of 70% basic salary and 30% allowances.

Your example shows the flaw in tiered systems:

• Someone who was making $74,000 will get a 5% reduction to $70,300
• Someone was was making $77,000 will get a 10% reduction to $69,300

So in the end the person who was making $3000 more is now making $1000 less, causing all sorts of organization pressure.

Ned
Born, raised and working in Suburban Philadelphia

Ned, you just blew my mind with the most basic of math.  What a conundrum.  

Great call out, Ned. You highlighted some sticky unintended consequences. Building the matrix/tiers is one thing, but organizations should carefully consider the detailed outcome before executing the plan.

Great observations from Ned, as usual. You have to consider break points. If you can solve these, you can proceed, equitably.

I appreciate the shout out's on the basic math. 

As I thought about it further...trying to get beyond the numbers...I settled on the fact that, at some point we will get beyond this.

The Wall Street Journal (April 13, 2020 print edition; updated on-line April 14, 2020 had an article that states, in part “The biggest players in tech are hoovering up talent in the midst of the corona virus pandemic.”  https://www.wsj.com/articles/looking-for-a-job-big-tech-is-still-hiring-11586712423?mod=searchresults&page=1&pos=1

I recognize that at lot of employers are on the verge of, if not in, crisis; and that a pay reduction beats a furlough.  But, and, at some point, we will get beyond this, and the competition for talent will heat-up.  If, and how, you implement pay reductions will come around in the future.

As a side note, the top execs at Comcast have announced that they are donating their salaries to COVID-19 charities – see

https://www.broadcastingcable.com/news/top-comcast-execs-donating-salaries-to-covid-19-charities

Ned

We have immplemented 5% across the board salary reduction for all staff locally in South Africa. Globally, the organisation Executie has volunteed a 30% salary cut to solidarity fund and we have requested all senior manaement to atleast contribute 10% to metigate the impact of the pandemic in different countries.