One of the dreams of every employee is to have their skills recognised by the employer to a level where they are considered for positive adjustment in pay.
While that outcome may be the desire of many, in this era of Covid-19 pandemic, pay cuts have been a reality for many employees.
Kenya Bureau of Statistics report shows that at least 1.7 million jobs in the formal sector were lost following slowing down of the economy due to Covid-19.
A report by the Federation of Kenya Employers (FKE) also shows that some five million jobs in the informal sector were lost as well.
Most employees anticipate that their pay will increase and so they make plans of what they will do with the extra cash once the pay cheque arrives at the end of the month.
Drive you crazy
To boost their chances of landing a better deal, they will put in the hard work that guarantees them that promotion because they need that extra zero on their pay cheque. The latest car model or your first one if you do not have one yet, a bigger house, and a change of wardrobe could be some of the changes in the mind of an employee when that promotion letter comes.
Yet this should not necessarily be the case according to human resource experts.
Lisa Osiako, the communication officer at Corporate Staffing Ltd, a recruitment agency, says more money should not be the main motivation for one to seek a promotion.
And when you get that money, do not let it drive you crazy with drastic decisions and changes to your lifestyle.
“Let your goals determine how much your lifestyle changes and even if it changes, make the changes gradual,” she says.
Osiako notes that it is almost automatic that once one receives a promotion that comes with a positive change in pay, their life will change.
“But that does not mean you drastically change everything,” she advises.
Avoid unnecessary changes
Some changes though, she notes could be necessary.
“I mean if you are going out with your colleagues after work then that has to stop especially if you become their boss,” she says.
While promotion does come with an extra income, Osiako says your focus as an employee should be on your goals. This is by determining first what the goals are so that when the money comes it will be a bonus.
“It is not very effective when it (money) is the priority,” says Osiako using herself as an example.
She recalls when she signed her promotion letter and she could not wait for the end of the month when the pay increment would reflect on her salary.
“But then the money came and how it went I have no idea,” recalls Osiako.
“Before you think of spending the new added salary, ask your self ’what I want to achieve?’’
Osiako says you should not be too quick to change your lifestyle whenever your pay increases.
“I know so many people who moved to bigger houses and realised later that it was not necessary at all. It is wiser to evaluate what is more important in your life before you make big switch,” she says.
As much as money is an effective motivator in seeking a promotion, she says, it is not the best drive.
“You will only be comfortable for a short time and that’s it,” she adds.
To avoid blunders that come with pay rises, Monica Karanja, a human resource manager at Octagon, a financial services company, says employees need financial education. The same knowledge is needed when a pay cut is on the table.
“I have seen people get affected by what is going into their bank. They feel that the bank people will notice and form an opinion about you. But the interesting thing is that the bank (people) do not even know you and do not care that you got a pay cut,” she says.
Karanja notes pay cuts or just a suggestion of such can drive employees to seek alternatives.
“I have had an experience where there was a proposed pay cut, it did not even happen but there was a lot of performance issues thereafter. As a coping mechanism, employees rushed out there to look for side hustles,” she says.
So what should an employee do when they get a pay cut?
Sting of pay cuts
Karanja says one should ask themselves pertinent questions on the future of their position in that organisation.
One critical question is: “do you prefer the pay cut or you would rather go out there and do your own things?”
“I have seen people exit because they felt their time is better utilised anywhere,” Karanja says.
She adds one should renegotiate any loans they might have by then.
“You must re-arrange any liability you have like a bank loan. You can also talk to your spouse if you are married and prepare the children for the expected change,” advises Karanja.
If you have any plans to start a side hustle or already have one, it is not wise to make it your main while still employed. This is even when this seems to be the sound financial decision at the time.
The side hustle question
She advises that a side hustle should not conflict with your responsibilities at your employer’s.
“I know when you talk to personal finance experts they will tell you to have more than one source of income,” she said adding that if one believes their side hustle is making more, then it might be time to transition.
Karanja says how well one can transition with a pay cut or pay rise is dependent on how well the employer has prepared them.
She says her organisation carries out trainings especially for new entry level employees on how they should manage their windfalls or doomsday.
The employer should have them ready psychologically and coach them through the expected changes.
“Every employer should ensure that as part of the learning development, they equip their staff with financial literacy,” she says.
If this is done, then when changes like pay rise and pay cuts come, the employees will not make drastic lifestyle changes or suffer panic attacks.
“Instead they will be into savings and investments to ensure they secure their future,” she says.