In addition to the pay, there are a variety of other aspects of a job that should be considered while making a judgment. The work itself, the degree of responsibility you are given, the title you are given, the opportunity for future advancement, and so on are all important factors. Other forms of pay, such as firm shares, bonuses, and vacation time, should also be taken into consideration.
Therefore, should your pay be your first priority? Is there ever a moment when it might be beneficial to voluntarily accept a wage cut? In order to determine whether or not it is beneficial to take a job with a lower income, we consulted HR professionals as well as genuine individuals who have been in similar situations in the past.
Here are seven scenarios in which you should give some thought to accepting a wage reduction, along with the opinions of several experts.
1. When You're Moving in a Different Professional Direction
If you are moving into a different field, you may find that it is in your best interest to accept a wage decrease. According to Trellis Usher, founder of the human resources business T.R. Ellis Group, taking a wage loss "to obtain a new set of abilities and experiences that will enhance your skill set" may be worthwhile. When you go into a job where you have little to no expertise, it is illogical to think that you would get top cash for your services. In circumstances like this, it is common practice to accept a wage reduction in order to position oneself for a big increase in compensation between 18 and 24 months later.
David Bakke, founder of MoneyCrashers.com, recalls the time when he decided to leave the restaurant business and, as a result, accepted a salary reduction in order to make the transition. "I was weary of all the long hours and weekend work," he recalls. "I had reached my breaking point." My new job required me to take a pay reduction of around 10 percent, but in exchange, it gave me the opportunity to spend more time with my loved ones and friends. In addition, the health insurance coverage was superior to what I received at my restaurant job, and I was given time off for all of the main holidays. At the end of the day, it is unrealistic to anticipate that one sector would be able to satisfy the compensation demands of a completely other profession.
2. If You Long for a Healthy Work-Life Balance
In a recent survey, the talent acquisition and career development company Mom Corps discovered that 45 percent of working adults are willing to give up some percentage of their salary in exchange for more flexibility at work; on average, they are willing to give up nearly 8.6 percent of their income.
Allison O'Kelly, the founder and CEO of Mom Corps, believes that the most important lesson that can be learned from this data is that a person's pay does not define them completely. "If you could avoid your commute and work from home on Fridays, would you be willing to accept a little wage sacrifice in exchange for the opportunity?" Would going into business for yourself make you a more content and happy professional, as well as provide you the opportunity to work in the way that best suits your needs?
Usher made a similar change in her own life: "After having a new baby, I accepted a job that needed less travel and enabled me to work from home a couple of days a week." "I needed to take on a function that was less difficult because of the requirements of my family," she says. "I wanted to continue in the business arena without losing too much ground, but I did need to take on a role that was less demanding."
When LeeAnn Shattuck left Accenture, which was once known as Anderson Consulting, to work for IBM 13 years ago, she accepted a pay reduction equivalent to 15% of her previous salary. "While working at Accenture, I was putting in an average of 80 hours each week and traveling five days per week. "IBM gave me the option to quit traveling and work from the comfort of my own home," she said. She has never, not once, second-guessed her choice, not even after all this time has passed.
3. If the New Opportunity Is Significantly More Favorable
If you have always wanted to work for a certain firm or if you are dissatisfied in your present position and have the possibility to get your ideal job, receiving a new job offer may be a terrific opportunity. Some examples of this include: Annabelle Chung (name changed) was earning $42,000 a year in her first job after graduating from college, and she anticipated receiving a bonus of around $10,000 annually. She was offered another position at a startup, but the young business was unable to provide her with the same income as her previous employer did. In addition to the fact that the new position only offered $35,000 per year in salary, she would have to forego her bonus exactly one month before it was scheduled to be paid out.
Chung had reached the point of exhaustion beyond which she could recover: "I would come home weeping on a daily basis and felt like I was losing a hold on who I was." Even though she was earning a relatively excellent pay for a recent college graduate, she didn't feel like there was much room for advancement in the company. She adds, "I thought that if I remained there any longer, I would be pigeonholed and never be able to escape." "I feared that if I stayed there any longer, I would get pigeonholed." "Everything I was seeking for in a new work, I found in this one. It was the job of my dreams—with one exception: the pay.
In the end, she was out roughly $17,000, but she was finally able to enjoy her independence. She adds, "After making the transfer, I felt doors opening up to me, and I learnt so much from the new role." "After making the switch, I felt doors opening up to me." She was able to more than regain her previous pay after just a few years at her new career because she was so good at it. In fact, after only a few years, she was earning almost twice what she had been making at her previous position.
4. When it All Evens Out
If you are able to reorganize your priorities and lower your expenses to the point where your decreased paycheck does not significantly alter your lifestyle, then you have mitigated a substantial portion of the negative effects of the pay reduction.
In order to "move out of one chaotic firm and to work five minutes from home," Julia Angelen accepted a wage drop from $65,000 to $50,000. She believes this allowed her to work more independently. Despite the fact that she was $15,000 in the red, she was able to save enough money in other areas to at least partially make up the difference. She cites "the cost savings in gas, eating out (I often went home for lunch), and massages and wine due to stress" as some of the areas in which she was able to achieve this. She walked to her new work on certain days, which not only helped her save money on gas but also allowed her to fit more exercise into her schedule. Since neither my title nor my level changed, you might call this a lateral transfer. Also, I was aware that the economy was going through a rough patch, so I understood that in hindsight, it would seem as if it was economic factors that were responsible for the reduction in my wage," she adds.
Angelen's income was reported to be lower than it really was, which, although not ideal, did not prevent her from finding other employment in the future. However, she was prepared with an explanation and a budget that allowed her to avoid going into the red. Additionally, she had a much better mood. This seems like a really sweet offer to us! It's possible that you may find yourself in a scenario similar to this one if, for instance, your new employer relocates you to a different place that has a cheaper cost of living. In this case, your reduced compensation would be offset by the lower costs you incur.
5. When You Have Another Desire That Takes Priority
Usher clarifies that "base pay is merely one component of an employee's overall remuneration," saying that "base pay is only one component." "It may be to an individual's advantage to accept a lower base wage in order to'sweeten the deal' in other ways," as the expression goes. These extra options may take the shape of pay-equivalents such as a signing bonus, an annual performance incentive, additional vacation time, paid time off, or reimbursement for educational expenses.
6. When Going It Alone for the First Time
It's possible that you've always dreamed of running your own business or striking out on your own as a freelancer. In any case, working for yourself always involves taking some kind of risk, which often takes the form of a temporary reduction in compensation as you get your new business off the ground. Before becoming a freelance software engineer, Ivan Karp (name has been changed) worked for a consulting business where the hours were hard, the boss was demanding, and there was very little office camaraderie. Now, Ivan Karp works independently.
He was aware that turning freelance would result in a reduction in his salary, but he decided that the trade-off was worthwhile since it allowed him to choose his own hours and made his life far less stressful. He had been wishing for more time to spend at the gym and with his friends; in his new life as a freelancer, he only works 35 hours a week, and that fits him just fine. He had been longing for more time to spend at the gym and with his friends.
As a freelancer, Karp is able to charge much more per hour than he did when he was working for a company that paid him a salary. As a result, even though he is responsible for paying his own health insurance premiums, the increase in his hourly wage almost makes up for the fact that he works almost part-time.
7. When You've Reached the Top of Your Pay Range
If you put in a lot of effort at work and have been there for a considerable amount of time, you've undoubtedly been rewarded with frequent pay increases. However, after a sufficient amount of time, you may reach the upper limit of the compensation range for your job. Timothy Wiedman, an associate professor of management and human resources at Doane College in Nebraska, believes that in a scenario like this, "further raises are not achievable without a promotion."
If you have reached the highest possible salary for your position and there are no more opportunities for advancement in your career at your current company (for example, because it is a small business and there is no room for promotion or because someone else already holds the job you want), it may be time to look for other opportunities. "Taking a wage drop in the near term may simply be considered as an investment in improved long-term career possibilities," he adds, "for example, accepting a job in a rapidly developing firm may lead to several chances for career progress and compensation rises."