Silicon Valley is being painted pink, as the world's leading technology companies handout redundancy notices as the global economic slump takes it toll on IT spending. The job cuts are affecting employees in the UK too, but our P45s aren't such a pretty colour.

And there are some other noticeable differences. Take systems and services heavyweight HP as an example. On the back of some pretty disappointing quarterly financials, its US-based staff were greeted today by the imposition of a five per cent pay cut.

The thinking, as explained by HP's chief executive Mark Hurd, is that its better for everyone to take a small hit now, rather than face more job cuts down the line.

Now HP is already in the middle of a three-year plan to cut 24,600 jobs worldwide, following on from its acquisition of EDS. So in some ways, it's perhaps understandable that Hurd is reluctant to announce further redundancies.

But does the wage-cutting plan make sense?

It's worth noting that it's largely US staff who will feel the first impact. European and UK labour laws forbid unilateral imposition of pay cuts. Nevertheless, HP's European managers look set to be asked whether they consent to a pay cut. What happens if they decline?

There is also the question of what impact this will have on staff morale. It's clearly not going to be widely celebrated. But is it worse than the corrosive effect of redundancies? I've a sneaking suspicion that it might be.

And what's more troubling is that it's a choice that could be faced by more business leaders. If – and for the moment it remains a "big if" – the UK were to enter a period of sustained deflation, the annual wage increase (or perhaps today, the annual wage freeze) could be replaced by annual pay cuts, as business leaders look to balance the books.

In such an event, staff morale is likely to take a hammering. Best be prepared to brush up on those motivational skills.