Main image of article When You Should (And Shouldn’t) Accept a Pay Cut

It’s been a turbulent few years for much of the tech industry. In late 2022 and early 2023, some of the largest companies in tech unleashed massive layoffs; meanwhile, smaller companies and startups saw funding dry up and VCs a bit more reluctant to invest. As a result, many tech professionals have been jumping jobs—and finding their new companies are offering them lower salaries than they’re used to.

Meanwhile, some companies are also offering remote workers lower compensation than they’d earn if they were heading into an office every day. Executives at these companies argue that remote tech professionals can withstand lower salaries because they’re living in areas with a lower cost of living (which isn’t always the case) and have no commuting costs (not always true, either).

Whatever the case, if you are facing a pay cut, what should you do? You can choose to accept or decline the request, but your decision may have consequences.

Here’s a look at the times when you should say “no” to a pay cut and the rare times when you should say “yes.”

Say No to a Pay Cut When…

1. Your Boss Agrees to Let You Continue Working Remotely

There is no justifiable reason to reduce your salary if your company agrees to permanent remote work and you subsequently decide to move to an area with a lower cost of living, explained Victoria Pynchon, a lawyer, negotiation expert and founder of She Negotiates.

“As long as you are doing the exact same job and making the same contribution to the company, your personal situation has no bearing on the value you bring,” Pynchon said adamantly. 

After all, should a company pay a single apartment dweller less than someone with a family and a big mortgage, so long as they are doing the same job? Most people would agree they should not.

While Pynchon acknowledges that many companies factor in market conditions and geography when setting salaries, considering someone’s personal situation creates wage inequality, which tech firms have been trying to overcome. Bringing that point up may help tip the scales in your favor.

On top of that, your remote or hybrid status has no impact on your importance to the organization. For example, data scientists, machine learning experts and other mission-critical roles can do their job perfectly well from home—and a company is in deep trouble if they decide to leave for another organization. If you’re a specialist, and your boss insists on paying you less as a remote worker, point out (politely) how much you contribute to the organization’s strategy and bottom line… whether you’re in an office cubicle or working from your home office.


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2. Revenues are Down, Profits are Flat

Yes, it’s been a hard road for many companies. Over the past 12 months, big names like Meta, Amazon, and Microsoft have laid off tens of thousands of workers. Small- to midsize tech firms have been forced to radically readjust their strategic roadmaps, restricting their budgets for talent. Some businesses have found ways to temporarily reduce operating costs by slashing discretionary bonuses, dividends, travel expenses and advertising expenditures—and some have proposed cutting base pay.

But just because a company’s taken an economic hit doesn’t mean you need to take a pay cut, especially if the company can meet its long-term expenses. Plus, the courts have ruled that reductions in salaries for exempt employees need to be tied to long-term business needs. “Taking advantage of a downturn in the economy to lower salaries when the business is not suffering, is incredibly bad form,” Pynchon lamented. 

3. The Pay Cuts are Disproportionate and Unfair

The moral and business arguments for sharing the pain during a downturn are clear, so before you agree to a reduction in salary, make sure the proposed pay cuts are proportionate and fair. 

For instance, mandating an across-the-board cut of 10 percent obviously has a much bigger impact on tech workers than tech CEOs (who averaged $6.6 million last year, according to data from executive compensation company Equilar). Executives should be leading the way.

Say 'Yes' to a Pay Cut When…

1. You Need to Buy Time

If you are a junior-level technologist employed by a small business or nonprofit that has been impacted by the pandemic and is struggling to make payroll, then it might make sense to take a pay cut until you get more experience, advised Clifford Stephan, a compensation consultant, expert and founder of OneCompensation. However, his advice comes with a caveat:

“If you’re at a critical juncture in your career, make sure you can keep your title or jump to a higher title and have the opportunity to add in-demand skills to your resume in exchange for a salary cut.”

Sometimes it’s easier to find a new job or negotiate the most favorable compensation package when you’re still employed and earning a high salary, Pynchon noted. (Keep in mind: Not every state or locality has outlawed pay history questions; you may lose negotiating power with a new employer if you take a cut and then decide to cover your bases by hitting the job market.)

Instead of taking a cut, see if you can stay with the company for 90 days while you look for a new job. Negotiating your exit terms creates goodwill and a sense of relief for the company, too, because they know exactly when you will be leaving.

2. It Works in Your Favor (Especially with Remote Work)

Run the numbers. If you can move to a city that is more affordable or reduce your hours and take-on a high-paying, skill-building side-hustle (or even start your own company), you may actually come out ahead despite a pay cut.

After all, changing your agreed-upon salary puts everything back on the table—and while pay is under pressure, employee perks are getting a fresh look. If you can negotiate stock options, a performance bonus or more time off to look for a better job, you may be able to mitigate much of the pay cut.

But with plenty of remote jobs out there, and a general demand for tech pros because of a notably low tech unemployment rate, you can likely find remote jobs that fit your salary needs. According to CompTIA’s monthly Tech Jobs Report, some of the top remote tech positions include software developers, project managers, data scientists, systems analysts and IT support specialists.

3. You’re Out of Options

If you can’t survive on unemployment benefits alone and you are holding onto your employer’s leg for dear life, then you may have no choice but to accept less money, Stephan observed. The reality is that you need to take steps to make yourself more marketable before you’re facing a salary cut, but if that doesn’t happen, you may need to stay the course.

In such situations, you may also have room to negotiate for some added perks and benefits in exchange for a pay cut. For example, maybe you can work fewer days per week, or you can devote more hours in-office to career growth, training, and education. If you have valuable skills, your manager and human resources department will want to keep you aboard somehow; use that as leverage.

4. You Really Want Better Work-Life Balance

There are plenty of tech professionals who might want to take a pay cut in exchange for a job that offers less stress and better work-life balance. If you’re debating whether to take a lower-paying job to be healthier, and what kind of pay cut is acceptable, it’s worth sitting down and seeing a.) whether your budget will sustain a cut (and how large of one), and b.) whether you can potentially get by with fewer benefits and perks (for example, few tech pros are willing to give up health insurance).

Taking a pay cut also don’t have to derail your career path. Ensure your new position will continue to provide you with the opportunities, training, education, and collaboration that every tech pro needs to fully realize any career dreams.

If taking a pay cut works out from a personal finances perspective, as well as a career development perspective, then you should consider going for it. Just make sure that taking a pay cut for less stress won’t accidentally translate into more stress, both in the short term and over the course of a couple years.