Reducing the salary after job offer?

Question

I just accepted a job offer from a small company recently. Shockingly, they just called me to inform me that they reduced my offer by about 10%. Luckily for me, I did not give a leaving notice to my current employer. Is this a reflection on my value or is there another reason a company would reduce the salary after making the initial offer? Am I off base thinking this could be a red flag about their business practices?

Answer 1

Although it has since been edited out of the question, you originally asked:

Is this practice unethical?

It doesn't fit with my ethics, or the ethics of any company I have ever worked for.

is there another reason a company would reduce the salary after making the initial offer?

I've heard of companies rescinding offers completely when financing goes south unexpectedly, or there are surprise layoffs. But I've never heard of a paycut imposed before starting - without any explanation being offered.

I suppose if the company instituted 10% across-the-board paycuts in the time between the offer and the start date, I could see this legitimately happening. But in that case the hiring manager (or HR) would have immediately provided this as the reason while communicating the paycut. It wouldn't be a "secret", right?

I struggle to come up with a "genuine reason" other than greed or "just because we can get away with it", where they wouldn't be forthcoming with a reason as soon as they notified you of the reduced offer.

You originally wrote:

Anyway, I will be passing this one for I could be in for a 50% cut after I start the job.

and the question has since been modified to ask:

Am I off base thinking this could be a red flag about their business practices?

It would be a red flag for me.

Passing on this offer makes sense to me. If this is the way they treat people who they presumably want to sign on, then you can imagine how they treat people in other circumstances.

You might want to try and get some sort of reason out of them, if possible.

And you should tell all your friends and associates to avoid this company.

Answer 2

Is this a reflection on my value...

No

... or is there another reason a company would reduce the salary after making the initial offer?

I can think of a couple of potential reasons:

1. They lost an account they were depending on to fund your salary.

2. They are having financial difficulties and are cutting everyone's salary by 10%.

3. There was a miscommunication between the person making the offer and the person who authorized the amount. They may be embarrassed to admit that they don't have the authority to set the amount directly.

Am I off base thinking this could be a red flag about their business practices?

You are not off base. The red flag is probably more about their stability and future ability to pay your salary on time than anything else.

It's tempting to suggest they're doing it out of greed, but that seems unlikely and very short sighted on their part (even if it seems that way to you).

Answer 3

How can a company have a genuine reason for doing this?

If they are applying a 10% salary reduction across the board for cost-saving purposes, decided on after the original offer was extended, then that would at least be a genuine principled reason for doing it. They'd be treating you no worse than all their existing employees. But I can't think of a principled reason why they wouldn't tell you that's the reason, so it seems unlikely to be the case here other than for the unprincipled reason that they think you won't want to work for them if you know how bad their situation is.

What I think is likely, is that they regret their original offer for some reason (maybe new information) and this is their idea of negotiation. They want another round after they think you're committed. It's unethical to renege on the original offer without an overwhelming reason that they can't honour it, and especially without explaining why.

I think it's particularly unethical in that they might benefit from the fact that, to satisfy your ethics, you may well have declined other offers immediately on accepting this one. That's the sense in which they think you're now "committed": you've already discarded any such aspect of your previous negotiating position.

At risk of setting up a straw man, they'd probably say it's "sharp negotiation", and that in their view it would be legitimate to do the same thing to any supplier -- offer a lower price after initial agreement in principle and before contracts. You could reasonably conclude that: it's not really legit even with a supplier since a formal offer is different from a general discussion on price; that you're not a supplier, you're a prospective employee; that you don't feel like working for someone who plans to trick you like that (or trick anybody else, for that matter); and that you can't put your faith in a company so immature that it thinks antagonising its employees before day 1 is a smart move.

Answer 4

I've never heard of this situation before. Since you will be rescinding your acceptance, it wouldn't hurt for you to ask them for the reason, but you may not receive a truthful answer.

The only thing I can think of is that right after giving you the offer, the company found another candidate for the position who indicated they would accept a salary 10% lower than yours. The company decided to lower your offer by 10%, knowing that if you decline, then they will just hire the other person.

Whether or not it's ethical, be grateful that they decided to reduce your salary before you quit your current job. Imagine how you would feel if you quit your current job, got settled in with this company, and then they gave you a pay cut.

Answer 5

Company which I recently interviewed with and did some negotiating with reduced the offer agreed to by the hiring manager. It was only 5% in my case however it was a reduction after everything was negotiated.

The reasoning that they presented to me was the hiring manager did not actually have the authority to negotiate the salary of employees due to their corp policies. After some later work with said company I discovered that the hiring manager was a complete nincompoop but that's a different story.

As far as ethics of this practice I would side with most in your case that without a reason provided there is not very much ground for them to stand on and should be a warning shot to how they would treat their employees if you do join their team.