What if Your Client Cuts Your Consultants' Hours?

Have any of you had a client mandate a reduction of hours for your consultants?  This is typical for clients struggling with the economy.  They're opting to retain good consultants in lieu of terminating their engagements.   There's a knee jerk temptation to cut the consultants' pay since your firm's margins just suffered a hit.   Cutting the consultants' pay only exacerbates the problem, however   For example, if you're required to reduce their hours by 20%, say 40 hours to 32 a week, the consultants make 20% less money.   If you try to pass along an additional reduction on the pay rate in an effort to preserve some margin, the consultants end up losing well more than 20%.   Obviously, you need to make a prudent business decision, but since the consultants may already be looking for new gigs due to the 20% reduction in hours, it seems you almost ensure their eventual departure if you inflict an additional reduction in the pay rate.   This isn't to say you should take a loss on the engagement (although at times that too may be advisable to preserve the relationship), but it's probably more important for everyone to share as equitably as possible the pain of a poor economic climate.