When it’s worth it to take a pay cut
In my relatively short 9 year career, I’ve taken two pay cuts. Taking less money is a hard thing to even consider (especially if you’re like me, and you’re not making a lot to begin with), but there’s so much more to a job than just the actual salary. When I eventually decided to take on less money, I factored in so many other benefits into the equation, and in the end both pay cuts seemed worth it to me.
Here are 5 reasons why I would consider taking a pay cut in the future:
When you’re changing careers
I think one of the major reasons why people consider pay cuts is when they are switching careers altogether. It’s unreasonable to expect to receive a large salary when you’re moved into a job where you have little (or no) experience.
And in some cases, changing industries and location could come with a permanent pay cut. Bigger cities could come with bigger salaries, and different industries just might not have the funds to pay top dollar for the position you’re looking for. For example, when I moved from a government job to a non-profit job, I accepted a 20% pay cut. That might be a bit drastic for some people, but I knew it was the right path for me to take.
When you start your own business (freelancing)
Self-employment is a dream many people have. But with that dream comes a lot of risk, and that could include taking a pay cut while you get yourself established, as well as having to hustle harder to get work. I know a few freelancers who went out on their own with just a couple of key clients. They worked part-time hours until they could establish themselves enough to bring in more work and hire employees to help with the workload.
As someone who once decided to quit their corporate job and try out freelancing full-time, I can tell you that it was a struggle at the beginning. Eventually, I was able to create a steady stream of income, and ended up making more money than at my 9-5 job, while working significantly less hours each week.
When there is more room for growth elsewhere
If your career path is stalled because it’s a small company, and there’s no room for a promotion or salary growth, it’s hard to stay in one place. A short-term salary cut in exchange for better long-term potential and growth could be a great investment in your future.
When your work-life balance needs adjusting
A few years ago, I was working 60-75 hours/week at my full-time job and freelancing. It wasn’t something I knew I could do long-term, and eventually I gave up the extra hours (and the extra money) in favour of a life where I worked a normal 40-50 hours/week. I am significantly happier now that I have time to dedicate to what I really love in life – spending time with friends and family, being outdoors, and having more time to focus on myself.
And yeah, I do miss the money, but I definitely don’t miss the stress (or the lack of sleep).
When the compensation perks make up for the salary
When I accepted the job I have now (after wage negotiations) I accepted a 15% pay cut from my previous job. It was really difficult to deal with at first, and I didn’t think I would be able to take the job. But once I started to look at the compensation perks and benefits associated with the position, I actually end up coming out ahead.
Not only do I spend less time commuting (which also saves on gas), but the extended health benefits are more extensive, it’s a 37.5 hour work week compared to 40 hours, I can bank time off, I get paid out for overtime, and employees receive two bonuses each year. With just the bonuses included, and I come out way ahead.
What are other reasons you would take a salary cut for?
Author: Krystal Yee
I’m a personal finance blogger and marketing professional based in Vancouver. I’m a former Toronto Star (Moneyville) columnist, author of The Beginner’s Guide to Saving and Investing, and co-founder of the Canadian Personal Finance Conference. When I’m not working, you can usually find me running, climbing, playing field hockey, or plotting my next adventure.