According to a study conducted by Qualtrics and Accel Partners, millennials are willing to take a pay cut of at least 3 percent in exchange for long-term job security (77 percent), flexible office hours (76 percent) and mentorship opportunities (67 percent). Some even indicated they would take a salary reduction of up to 12 percent for these benefits.
It is probably something you never thought you would consider, but when does a pay cut make sense?
If a higher-level position is raising your stress levels or maybe you just expanded your family and want more time at home, you might consider taking a step down at work. Usually, a reduction in salary comes with less responsibility, and it may be exactly what you need at this time in your life. There is no shame in recognizing you need more time off the clock to keep your well-being in check.
Flexible Working Options
Whether it is working remotely or logging on during non-traditional hours, a position that offers flexibility may be worth taking a salary cut. It not only typically contributes to a better work-life balance but may also be a way to save money on things like commuting expenses or childcare costs.
A work environment that is demotivating and draining can take its toll on you. You may consider taking a pay cut to get yourself out of a toxic environment and into a company that will take better care of you.
Cost Of Living
If you are moving to a region where the cost of living is cheaper, you may be forced to take a pay cut. Before making this decision, conduct an analysis to compare the difference in salary and living expenses. A calculator like Bankrate’s cost of living calculator can help.
Benefits And Perks
When you landed the job, maybe you were in your 20’s and single (and still on your parents’ health plan), but now that you have dependents, you need health insurance – stat! A cut in salary instead of better benefits may be worth it. Tuition reimbursement or continuing education opportunities are other valuable benefits that may warrant a pay cut. Moreover, with companies increasingly offering unlimited vacation time, more paid time off might help decide for you. While perks like gym memberships and free lunches are fun bonuses, they probably are not valuable enough to consider taking a substantial hit on your income.
There are plenty of reasons you may be changing your career path. Also, you are moving into a field in which none of your skills transfer, you probably have to start at the bottom and work your way up again. If you know this is the new direction you want your life to head, then you may have to pay the piper. However, remember why you are taking this new path in the first place.
Future Career Advancement
A dead-end job is more than just depressing. If you have hit the top of your pay range for a position and there are no openings to move up, it may be time to leave and consider a lower salary for more opportunity. Another position (in a different department or with a competitor) could have a higher pay range – but you may be required to start at the low end of the salary range. Think about the future payoff here and figure out how long you will be living off less before your earning potential goes up. Some typical situations where this is worth it are taking jobs with startups or even starting your own business. Sometimes you have to take one step back to go two steps forward.
Obviously, a shorter commute will save on transportation costs, so a pay cut is worth considering based just on that fact. The savings may make up for the salary reduction. Additionally, think about other potential savings and perks that go along with being closer to home, like going home for lunch or cutting out extra childcare costs.
Sometimes, less can be more – even financially as well. And, who knows? With a pay cut, you may end up making significantly more money in the future.