COVID19 effect: Best way to take a salary reduction?


  • 500 Club

    So even while my healthcare workplace is more stressed due to COVID19, we have to cut 10% because of business slowdown. Maybe this is obvious but I want to make the best decision.

    Employer will no longer be making 3% match to our IRA’s.
    In addition, we’ve been asked to either decrease our hours worked or our pay rate by 10%.
    One option we’ve been given is to take time off using earned/flex time.
    Another option is to take unpaid time off which preserves earned/flex time.
    Am I correct that the smartest thing to do is to take a pay cut?

    We’ve been told that our benefits will not change BUT our “earned time/flex time” is based on hours worked, you earn an hour for every ‘x’ number of hours worked. I don’t know the ratio. Earned time can be used for whatever one wants.

    Health insurances are fixed premiums.
    I receive money for continuing education each year. Its based on hours worked.
    I’m maxing out contribution to 401k and 457B. Those are capped by $$ amt and I max out before the end of the calendar year.

    If we don’t use our ‘earned time’ before the end of the year it can roll over to a max of 250 hrs (25 days). If you max out the 250 hrs you either lose the time or can roll it into what they call “sick bank”. Sick bank can only be used if you’re sick. But if you get sick you can use those hours instead of earned time thereby saving time for vacation, etc. I’ve maxed out the 250 hrs that can be rolled and have same amount (25 days) in sick bank but using those hours wouldn’t count towards the 10% reduction because they are not vested hours.

    I’ve been saving the banked earned time for when I retire in a few years. At that point I’ll have option of taking it as a lump sum or continuing as an employee w/ benefits while using up the hours.

    So again, is my smartest option to take a salary reduction?



  • The problem with your situation is that you don’t have any assurance that this is the only action your employer will take. You could be asked to make further concessions at a later date. Based on the uncertainty around your situation, I’d consider taking time off using flex/vacation as long as you have a separate bank of time for sick leave. That way, if your employer institutes a mandatory pay cut, you’re not already in a deficit situation pay-wise. Besides, you can always take your vacation time if you get sick, right?


  • 500 Club

    @zerenia thanks. I’ve always thought of my vacation time as part of my retirement planning and retirement funds don’t get touched.
    I never considered the possibility that it could get worse…



  • Not related to your question really but: My understanding is that if you are maxing out your 401k early, then you were possibly missing out on some of the employer match. At least in my workplace, they only match when you are contributing, so it’s recommended to space it out through the entire year (unless there are other factors that would affect it, like you were not planning on working the entire year).
    Since they are no longer going to be matching, I guess it’s not as relevant, and as long as you get the maximum match before they stop, that’s all you can do.


  • 500 Club

    @hbg1 I was maxing out in November/December. Its spread out as much over the year as possible.


  • 500 Club

    Just received email asking about cross-training for another department. I could end up working more hours than I normally work. I wish I knew in advance if that was going to happen. If it does then I’m better off using current vacation time because I’ll be earning more and it would be at usual/higher pay rate.



  • I’d be asking more serious questions. Viability & risk. And preparing for the worst just above the very worst. But I’m a pessimist so weight that as well.


  • 500 Club

    @zapjb said in COVID19 effect: Best way to take a salary reduction?:

    I’d be asking more serious questions. Viability & risk. And preparing for the worst just above the very worst. But I’m a pessimist so weight that as well.

    Viable and low risk. Federally designated critical access hospital.



  • Age makes a difference. Older less risk is tolerable. I think this present crisis is going to last at least 6mos. And you said this is a hospital. If 'twas me I’d retire, self impose isolation & stock up.


  • 500 Club

    @zapjb I’d be bored if I retired. As for stocking up, I’m a coupon shopper with a stockpile. I have a year or more of food and supplies on hand all the time. When my sister asked if I had any hand sanitizer I shipped her a couple of containers of sanitizing hand wipes. Last weekend my neighbor needed mayonnaise. I have an annual sale to rotate the stock so most of it is less than a year old but I have cases of toilet paper, Kleenex and Clorox wipes left over from last year’s sale.


 

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