Are pay freezes counterproductive to attracting talent?

By Scot Herrick | Cube Rules Commentary

Feb 19

Well, the thinking at the top of big companies (Boeing’s CEO) looks like this:

“More than a few of you have written to me asking whether we could avoid layoffs altogether by not paying incentive awards this year or by freezing wages across the board,” McNerney noted.

He said such actions would preserve some cash during the year and lessen the immediate impact on people, but “our judgment (and one shared by most major companies) is that they would put us at a competitive disadvantage.”

Since Jan. 1 Boeing has announced plans to lay off about 10,000 employees, mostly in overhead and military-related positions but few in the commercial airplane production and engineering jobs.

Boeing consistently lays people off virtually every year in some area of the company.

As an employee, would you rather take a pay freeze and/or forego a bonus and keep your job? Or would you rather risk the layoff?

Do you think if a company imposes pay freezes and pays out bonuses based on the economy in tough times that your talented self wouldn’t consider working there?

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About the Author

Scot Herrick is the author of “I’ve Landed My Dream Job–Now What???” and owner of Cube Rules, LLC. Scot has a long history of management and individual contribution in multiple Fortune 100 corporations.

  • Dan Erwin says:

    I’m really curious as to how this will be answered. First question: I’d take the payfreeze and start looking around. Second question: My own suspicion–and I’m only aware of one colleague who’s been laid off, based on the 300-400 I keep touch with–is that the decision is highly situational. That there are no rules, whatsover. And that what’s true in one setting may not be true in another. My answer: it depends.

  • Scot says:

    @Dan — you are fortunate that you know so few people laid off. I saw some numbers that suggest 75% of the (American) populace knows a friend or family member who has been laid off in the past year. In some industries, it is more horrific than others, so “it depends” is probably a good answer.

    I just thought that it was an interesting choice by a CEO: if you need to cut budgets and payroll is one of the cuts, you would choose layoffs because you think it would hurt your hiring to go for a temporary pay freeze.

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