The Pros and Cons of a Unique Pay System

The Top 100 Workplaces in southeastern Wisconsin was released in last Sunday's Milwaukee Journal Sentinel.

In case you missed it, the special section can be accessed here:

http://www.jsonline.com/business/94285359.html

Among the companies on this annual list are mainstays like Sargento Cheese and Northwestern Mutual, however the list also includes small employers that employ less than 100 people.

#8 for small employers is Nucor Steel, which is headquartered in Charlotte but has 62 employees locally. The JS section includes a specific article about the company, found here:

http://www.jsonline.com/business/93960929.html

The article mentions that even though Nucor had it worst year financially ever in 2009, it didn't lay off a single employee. Actually they've never laid off anyone company-wide due to lack of work. How was this possible in our worst downturn in decades?

While there were no layoffs, Nucor makes no reservations that it did drastically cut employee pay last year, in some cases income fluctuated by as much as 50%. In good times, an employee on the shop floor makes $24 an hour. When it is slow, that can go as low as $12.50. Also, everyone participated in last year's pay reduction.

So what's better for an organization, layoffs or drastic pay reduction? Here's a quick pro/con list.

Organizational Benefits of High Pay Reduction Rather than Layoffs

1) Job Security: Employees know they will always have a position, and can relax and work without fear. The gossip that can deter productivity when jobs are up in the air is eliminated.

2) No Favorites: With everyone top to bottom participating in the pay reduction, all employees know that there are no favorites in the office and that we're "all in this together."

Organizational Benefits of Layoffs Rather than High Pay Reduction

1) Best employees being treated unfairly: While its great that no one loses their job, every company probably has some people not pulling their weight. The high performer probably shouldn't have to carry that employee that can't or barely meets their job tasks.

2) Quality of Life Affect: While not privy to Nucor's financial situation, as a company with more than 20,000 nationwide employees, is drastic pay reduction negatively affecting morale? With incomes down in some cases by 50%, ends likely become very tough to meet for most employees

Overall, even though Nucor's philosophy is unique, you can't argue with what their employees think. The company scored very high in the JS's survey in the areas of teamwork and caring for their employees. While it might not be the best fit for all companies, it is clearly working for Nucor Steel.