Voluntary Pay Cuts and ‘Solidary Salaries’

Voluntary pay cuts have more or less become a norm worldwide. Compiling a list of companies who have adopted this policy would be difficult, especially because of the vast amount of companies deciding on it and the secrecy around many of these arrangements. How is this trend developing in Mexico and what other proposals are being made?

Voluntary pay cuts manifest themselves in different shapes. Some companies offer employees unpaid leave, with the promise to be able to return to work once the situation resolves itself. Other companies are focusing on their highest earners to take the cut, although companies also elect to include everyone equally, except lower paid staff. President López Obrador, for instance, applied pay cuts to his staff involuntarily but left out anyone who earns less than MX$20,000 (US$818.6) per month.

Corinne Aldridge, Head of Employment at Kingsley Napley, explained to the Financial Times that in the UK reductions often ranged from 20 to 40 percent, urging those with lower percentage proposals to take the reduction at the risk of being accused of not being a team player and therefore laid off. She suggests companies offering pay cuts to present a formal proposal, with a clear contract stating a defined start and end day. Empathy coming from employers is important as well. Not only does it help with getting people ‘on board,’ and therefore making the salary reduction an effective tool, there are plenty of moral arguments to be made. If these are combined with more business arguments, salary reductions suddenly make a lot of sense.

COPARMEX’s President Gustavo de Hoyos supports this idea, but suggests to apply it at a bigger scale, reported El Universal. His proposal of a ‘solidary salary’ includes contributions from business leaders, the government and workers alike. After raising MX$96.84 billion (US$3.96 billion) from the public sector, a fund can be created in which both government and bosses take care of the two halves of a salary from those earning the lowest. In case a worker earns more than triple of the minimum wage, they themselves will contribute 20 percent. Therefore, workers earning less than MX$10,000 (US$409.3) per month are fully protected.

The ‘solidary salary’ is not without discussion, however. Yesterday, representatives of the private sector were surprised by statements from the President of the National Commission on Minimum Wages (CONASAMI), Andrés Peñaloza, as he argued against the approval of a solidarity salary. In an interview published by Reforma, Peñaloza assured that the existence of a solidary salary would have to be a long-term project, since the proposal would have to go through the approval of unemployment insurance and that according to Peñaloza, the federal government is focused on implementing other solutions.