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Salary reductions presentation june 2020 with formatting
- 1. Pay Reduction Data during the COVID pandemic June 2020
- 2. Salary Reduction Reduction of Work Week Example: 4 day work week, with a corresponding 20% reduction in pay. Courtesy of Shaw Law Group PC If employee job duties are altered, need to pass “exempt duties” test under applicable state and federal laws If reclassifying to nonexempt, new work rules will have to be adhered to (Timekeeping, Meals, Rest breaks etc) Courtesy SHRM May be FLSA compliance impacts as well to consider before implementing Courtesy WolrdAtWork Other impacts at well: Retirement Plan contributions, Benefit Plans, Collective Bargaining issues, Employment Agreements, applicable state notices, etc Courtesy Foley & Lardner LLP
- 3. Salary Reduction 61% of companies in Russell 3000 Index applied pay reductions to the base salaries of senior managers who make less than top-tier executives. 11% of all companies in the index announced base pay cuts between March 1 and April 24. These announcements peaked in early April, but more cuts feared as country moves further along in the pandemic Courtesy of Fast Company
- 4. Salary Reduction Example: One company instituted 15-25% pay cuts for senior managers, with lower levels reductions of 10%. Employees earning less than $50k didn’t have salaries reduced Employees generally pleased to keep their jobs Employees received Friday afternoons off as an offset enticement When business needs increase, it will be easier to ramp up production than if mass layoffs were instituted Courtesy of NY Times 5/24/20
- 5. Salary Reduction Of 301 largest companies surveyed, 9% have instituted non-executive employee pay cuts Courtesy of Just Capital
- 6. Salary Reduction 601 companies have reduced salaries during the pandemic Notable companies such as LuluLemon Athletica Inc., JetBlue Airways Corporation, Urban Outfitter’s Inc, and Lands’ End Inc. 11% of Russell 3000 Index announced executive-based pay cuts since COVID began. Peak time for cuts was early April More than 60% of cuts came from hard hit industries (Hospitality, Retail, Health Care and IT) Consumer Discretionary sector was hardest hit for reductions Sectors not significantly impacted include Materials, Consumer Staples, Financials, and Utilities Most announcements have been at mid-market sized companies Of the announced cuts, 1/3 of CEO’s won’t receive base salaries in 2020
- 7. Salary Reduction Other Executives beyond the C-Suite are having their salaries cut as well A lot of these executive cuts have been “Tiered” reductions Though not as extensive as salary reductions, some executives are seeing annual bonus payments either cut or eliminated All information on these 2 slides courtesy of The Conference Board, in collaboration with Semler Brossy and ESGauge Analytics
- 8. Public companies implementing pay reductions rather than layoffs Differs from 2008 financial crisis when layoffs were more prevalent than senior leader pay cuts. 151 companies surveyed, and 143 implemented CEO pay cuts Over half of the companies surveyed had salary reductions for CEO’s and other top executives 16% had reductions for other salaried employees Of the companies implementing salary reductions, 66% said the cuts were “temporary” or “indefinite” and didn’t have a specified end date Most impacted industries include airlines, transportation and hospitality Courtesy of HR Dive
- 9. Salary Reduction Company-Specific data GM 6,500 salaried employees furloughed, at 75% pay. Senior Execs had pay cuts of 5-10%, with 20% of salaries deferred, to be paid out at a later date Ford: Deferred salaries of top 300 Executives Buzzfeed: Graduated salary reductions in April/May. Salaries of less than $65k – 5% pay cut Salaries over $125k – pay reductions greater than 10% Executive salaries cut between 14-25% Courtesy of SHRM
- 10. Salary Reduction Company-Specific data (Continued) Occidental Petroleum Corp Temporarily cut US salaries up to 30% Cheesecake Factory Inc Cut pay for Bakery/Corporate workers by up to 20% Steelcase Inc Some US salaried worker’s had base pay and hours temporarily reduced to 50%. Larger cuts for higher-paid workers Courtesy of Wall Street Journal 4/3/20
- 11. Salary Reduction Company-Specific data (Continued) AEG (2nd largest Concert Promoter in US) Implemented furloughs and salary reductions More savings needed and company had to resort to layoffs. Company didn’t see live concerts occurring until 2021 – thus layoffs were deemed necessary Courtesy LA Times 6/8/20
- 12. Salary Reduction- Summary and Helpful Tips What we are seeing: The trend is to tier cuts to employees based on salaries Large and midsize companies in significant numbers are taking actions to reduce salaries of employees Executives (C suite) are taking the largest cuts especially in largest and top companies. Ranging from cutting base pay entirely to a range of 20%-30% Higher level directors and managers are taking cuts between 15-30%. Employees above $50k to 100k are seeing cuts from 10% to 15% in rare instances 20%
- 13. Salary Reduction- Summary and Helpful tips Give as much time for employees to adjust before enacting changes- communicate if this is temporary or not and when restoration can be expected Do not brag about saving jobs as in the future you may have to Consider new work schedules four days paid, one day furloughed in the week for lesser paid employees Being fair does not mean everyone sees the same % cut; tier cuts based on salary levels- Executives take the lead with largest percent cuts Cut Bonus, profit sharing, variable pay plans first to reduce impacts to Move commission employees to base pay draws commensurate to territory pipeline and outlook. Look to other cuts in the package first such as Health Care Subsidies over 75%, Other areas , 401(k) match suspensions), overtime hours, travel expenses, offsite and on-line education expenses, company car allowances,