Is It Ever A Good Idea To Take A Pay Cut?

Finding a new job is a tricky beast to wrangle at the best of times. From fielding recruiters to scheduling interviews to negotiating your offer, it can be a stressful experience from beginning to end. So, when you’re offered a job, even if it pays less than the role you’re leaving, should you take it just to be done with the job hunt?

For many, taking a pay cut is unthinkable. Earning less can impact your ability to pay your bills, and if you end up falling behind because you’ve taken a pay cut, your credit score could plummet. But for others, accepting a smaller salary can, in some circumstances, be a good idea. In this guide, we’re running through some of the situations where it might be wise to consider a lower wage, as well as a few of the scenarios where you shouldn’t settle for less.

When you’re looking for work

Of course, if you have savings you can live on for a while, then you can perhaps afford to hold out for a job paying the kind of salary you’re looking for when you’ve already left your previous role. But, if you’re out of work and you need money, then any job paying enough to cover your essential expenses and keep you afloat will do – for now.

While it isn’t usually a great idea to chop and change jobs too often if you can help it, you can of course continue your job search, and move on to a role with a higher salary when you find one. You could also use a position with a smaller salary as a way into higher-paying roles at that company further down the line!

When you’re shaking things up

Whether it’s moving into a different industry or changing career completely, these are both times it’s pretty likely and totally OK to take a pay cut! Let’s tackle them one at a time.

When you’re moving from a job in one industry to the same job in another industry, you might expect your salary to stay pretty much flat. After all, you’re doing the same job, with the same level of expertise, aren’t you? Maybe, but maybe not. Let’s say you’re moving from being a customer service assistant for a fashion brand, to a customer service assistant in a bank. Your knowledge of how to deliver a good customer experience and keep people happy will stand you in good stead, but you’ll have a lot to learn, about your new industry, too. While you’re on this learning curve, your salary may be lower than in your last job, but if it looks likely to pave the way to a bigger salary and greater earning potential, it’s OK!

Likewise, if you decide to change to a completely different job and start over in a new career, it’s normal to also have to start again from the bottom of that career path’s salary ladder. It can be a bitter pill to swallow, especially if you’d worked your way up and were earning a good salary in your old job. But, if it means moving into a job you’re passionate about, or that has higher earning potential as you pick up experience and move up the ranks, then a short-term pay cut will be worth it in the long run!

When it makes you happy

Most of us need to work to have enough money to cover our essentials and enjoy ourselves, too. So, it’s important that the job you spend a good chunk of your week doing is something that makes you happy, whether that’s because it’s in an environment you love, includes tasks you find interesting and enjoyable, or allows you to live the life you want for yourself. Unfortunately, for many people, their job isn’t ticking all these boxes, and if it’s suggested you take a pay cut when it won’t make you any happier or could make the situation worse, don’t do it! But, if taking a pay cut means you can escape a toxic workplace culture or achieve a better work/home life balance, if, despite having less money, you think you will be happier overall, we say go for it!

When you’ve hit a salary ceiling

If you’ve been in your job – and been good at it – for a long time, then you may well have received regular pay rises and may even be paid over the odds for your position because of your loyalty to the company. But, if your next step is a promotion that isn’t available with your current employer and you’re not able to change role and get a promotion at the same time, you may need to take a pay cut to side-step into a similar role at another company that does come with that promotion opportunity.

Like other situations where it’s OK to take a pay cut, taking a small salary step back now can help you to leap forward later. So, it’s important to keep your long-term goals in mind as well as your short-term to make sure present-day you is doing future-you all the favours you can!

When you might lose your job if you don’t

Sometimes companies hand out pay cuts instead of pay rises. Usually if this happens, it’s because they’re struggling and have no choice but to ask you to choose between staying on at a lower salary or being made redundant. Neither of these options is ideal, but if you would still be able to cover your essential costs on a lower salary, it might be the lesser evil to keep you earning while you kick off a job search.

Occasionally, though, a company will suggest they cut your pay when it’s obvious they’re doing well, turning a profit and not cutting costs in other areas. If you think this is happening to you, it’s worth thinking about it very carefully and discussing it with your HR department to understand why, before you decide whether to accept the pay cut or move on.