More than 50% of workers open to pay cuts amid layoffs, study reveals

With many companies scaling back their staffing levels this year, a new study found that more than half of employees would be willing to accept a pay cut to avoid losing their jobs.

According to a survey conducted by the National Bureau of Economic Research (NBER), 60 per cent of workers who were recently laid off would have accepted a wage reduction of five per cent.

If steeper cuts were necessary, nearly one-third of respondents claimed that they would have been open to their employer slashing their wages by as much as 25 per cent.

While many employees would be willing to modify their wages when faced with a layoff, the data also revealed that fewer than three per cent of respondents were offered a pay cut to save their job.

“Employer reluctance to offer wage cuts becomes more puzzling in the face of widespread worker willingness to accept them,” the study reads.

“To our knowledge, we are the first to document the disjunction between worker-side openness to wage cuts and a widespread unwillingness of employers to even broach the subject.”

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When asked why their employer didn’t offer a pay cut ahead of layoffs, nearly 39 per cent of workers said they “don’t know.”

Major layoffs continue

The NBER’s findings come amid a flurry of layoffs in 2023.

Several major North American companies, including Rapid7, Dell, Discord, Telus, Amazon, Microsoft, Rogers, Ritual, and Meta, have announced deep job cuts as they continue to navigate challenging economic conditions.

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• Where are layoffs happening in Canada?

Can my boss reduce my wages?

In most cases, employers in Canada can’t significantly reduce a non-unionized worker’s salary or commission without the individual’s consent.

Exceptions: There are some situations where your boss might be able to modify the terms of your employment without breaching your rights:

• You signed an employment contract that gives the company permission to reduce your wages
• Your employer gave you reasonable notice of the pay cut

When substantial changes are made to your job without your approval, there is a very good chance that you can treat it as a constructive dismissal.

In this situation, the law allows you to quit your job and pursue full severance pay.

However, you shouldn’t resign until an experienced employment lawyer at Samfiru Tumarkin LLP confirms that you have been constructively dismissed.

ADDITIONAL RESOURCES
• Can employers in Ontario cut a worker’s pay?
• Pay cuts in Alberta: What employees need to know
• Boss cut your pay in B.C.: Your rights

Termination agreements for non-unionized employees

Non-unionized employees in Canada are owed full severance pay when they lose their jobs due to downsizing, corporate restructuring, or the closure of the business.

This includes individuals working full-time, part-time, or hourly in Ontario, Alberta, and B.C.

People working “on contract” or as a contractor may also be owed severance pay — given that many employees in Canada are often misclassified as independent contractors.

Severance can be as much as 24 months’ pay, depending on a number of factors.

LEARN MORE
• Severance pay for provincially regulated employees
• Rights to severance for federally regulated employees
• Severance entitlements during mass layoffs

WATCH: Employment lawyer Lior Samfiru explains what rights employees have if they are being fired or let go on an episode of the Employment Law Show.

Before you accept any severance offer, have an experienced employment lawyer at Samfiru Tumarkin LLP review it and your employment contract.

We can tell you if what you have been provided is fair and how to get proper severance if it falls short of what you are actually owed.

If you don’t receive the full amount, which happens often, you have been wrongfully dismissed and are entitled to compensation.

In some cases, employers pressure staff into accepting poor severance packages, such as imposing a deadline for accepting the offer.

Non-unionized employees in Canada have up to two years from the date of their dismissal to pursue a claim for full severance pay.