Ask HN: Is this a bad sign? | Hacker News Reader

Ask HN: Is this a bad sign?

9 pointscincinatus7 comments

I recently started working for this startup about 5 months ago, great team awesome pay. I work remotely from half way across the world, recently I was asked to take a pay cut because revenue was not much so they had to cut cost.

As a remote developer with no benefits or equity, what should I consider before accepting this, and also is this a bad sign for the company?

View on HN

Well... several possibilities.

Could be that they are lying about revenues being small and just trying to squeeze you. That would be a bad thing.

Or, could be they're telling the truth and revenues are struggling. That is a bad sign in terms of financial health.

Seeking to cut costs when times are hard can be a sign of responsible discipline or a sign of desperation.

It's usually a bad sign that a company offers "great pay" and then has to dial it back. Generally seems like a lack of discipline and financial forecasting savvy and controls.

It's hard to say what is going on here specifically. For most startups, you're dealing with inexperienced leadership and most often these measures are a very bad sign. But this may be an exception.

How much experience do the founders have running companies? What % of pay did they ask you to cut? Can you ask if any layoffs are happening? Can you ask how much cash the company has, what monthly cash burn is and/or how much runway is left?

You should ask for something in exchange for the reduction, if you take it. If you believe in the company, you could ask for equity. You could ask for an agreement that they give you at least, say, 8 weeks severance if they let you go (since accepting the pay cut will eat into your ability to save and leave you in a bad position if they need to lay you off).

I'd brush up the ol' resume and start putting feelers out there, just to be safe! Try to ask some of the questions above and also think of what you'd like to receive in exchange for taking less cash pay.

Good luck!

My take is that it's a sign that the company is running low on cash and it is a sign that it has recognized the need to reduce its burn rate and it is a sign that the company is looking to reduce its expenses in regard to programming and it is a sign that your last invoice might not be paid and a sign that your invoices prior to the last invoice might not be paid. If you let them stack up.

Whether or not it's acceptable depends on which other options are available. If those options make the pay reduction acceptable, my advice is to require pre-payment in exchange for the reduction in rate.

The company has acknowledged pending cash flow problems. If the company balks at prepayment, it means that not paying you for work you have done is an option the company is considering as part of its survival plan.

There's no reason to trust the company to pay more than they trust you to do the work.

Good luck.

Is the cut being applied across the board, or just to you as a remote worker?

How open are they being with you about the financial forecasts? Would someone in the leadership team walk you through how, if everyone takes a haircut, this is going to make the difference to whether the company succeeds or fails? If it were me, a big part of my decision would be based on how engaged the leadership team were in keeping me on board, and how they communicated their calculations.

The fact that you have no equity could (should?) be negotiable. You would be perfectly within your rights to say, look, if I take a haircut on salary because I believe in the company, I should get some options / equity to reward me for having that faith.

Of course if you don't want equity because, deep down, you're not a believer, then you may as well start looking at alternatives that will match or better your current deal.

The cut is across the board as I was meant to understand. Everyone is getting a pay cut.

I'm a remote worker in a start-up too and had a similar problem.

Last year in August they told me, they will get an investor in a few months and if I could wait for my money till then.

The discussions with the investor took a 2/3 year and I got paid last month.

They paid a bills sporadically in that time and in the end I had to wait for half a year of payment.

Most people would have already stopped working. I didn't because it's my first remote job and I wanted to tell future customers that I worked more than a year as remote worker.

Also, I knew they got some buying offers from bigger companies, so the discussions with the investors weren't about "if" they get money from them, but how to get as much as possible from them.

I think this is a special case, because most start-ups don't get any buying offers and really struggle with their finances. I wouldn't have done it, if I didn't know about this...

IMHO you should only accept the cut if you answer absolutely yes to the following questions:

* are you 100% sure that, if revenue had been higher than expected, they would have given you a substantial raise? Or are you supposed to share the losses but not the gains?

* can you take the cut without blinking?

* is working for this startup really better than working for a comparative startup that doesn't try to pay less than agreed upon?

Yes, you should accept. If you don't, you're not a "team player", and that's the kiss of death at any company.

Then, if the pay cut was significant, start thinking about other employment. If you have no benefits and no equity, it should make your decision easier.

is this a bad sign for the company?

Not necessarily. Many startups go thru uneven growth.

Reply on news.ycombinator.com