More companies center cost-cutting strategies on 'shared pain' than in past downturns

The corporate impulse to reduce salaries, especially at senior levels, to avoid layoffs is more widespread compared to the last recession, according to The New York Times.

"What we're seeing this time around is more of a sense of shared sacrifice and shared pain," Donald Delves, compensation expert with Willis Towers Watson, told NYT. Companies are motivated to protect their employees, but pay cuts instead of layoffs can also help in the long term to avoid the financial and time costs of rehiring and restaffing.  

Becker's has followed 31 health system leadership teams and executives who have taken reductions in pay since the start of the pandemic. For-profit hospital operator HCA Healthcare is one of them and was profiled by the NYT for its efforts to avoid layoffs and furloughs. 

Nashville, Tenn.-based HCA's senior management took a 30 percent pay cut, while corporate employees at lower levels saw compensation reduced by 10 to 20 percent. CEO Sam Hazen donated his pay in April and May to HCA's Hope Fund, which provides assistance to employees with proven financial needs. The board of directors waived cash compensation for the rest of 2020, allowing the company to make an additional contribution to the fund. 

In total, approximately 15,000 employees out of 275,000 were affected. HCA does not expect pay reductions to go past June, according to NYT.

Executive compensation packages are multifaceted, however. Salary reductions hold varying amounts of weight. For most C-level executives, the bulk of their compensation comes in stock awards, Amit Batish, manager of content and communications for Equilar, told NYT.

Salary reductions may coincide with job cuts if the pandemic crisis lasts longer than expected and the economy keeps shrinking. At the same time, the NYT says the fact that some companies were able to avoid layoffs by reducing salaries raises the question of whether more jobs could have been spared over the past two months if other companies had done the same.

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