First, I should mention that I have seen it happen at small startups, when all members are necessary and they are all also invested in the firm's success (e.g.

First, I should mention that I have seen it happen at small startups, when all members are necessary and they are all also invested in the firm's success (e.g. they profit big-time if the startup pulls through). Having said that, more commonly it is the case that the headcount is simply more than is needed for the current amount of revenue, so you have two choices: 1) cut all salaries, and see the most valuable employees leave, or... 2) decide for yourself which employees leave It's kind of brutal, and it's good to avoid it when you can, but it's not often that you can.