Wednesday focus: The workplace

Which is the lesser corporate evil: to lay off more workers or save those jobs by cutting everyone’s salary?

With companies slashing tens of thousands of jobs, a growing number are trimming the paychecks of those left in place, with the cuts of 5 percent to 10 percent.

Few, though, have gone as far as Acco Brands Corp. of Lincolnshire, Ill., to employ what it sees as a job-saving, morale-salvaging strategy.

The company, which supplies office products to such retailers as Office Depot Inc., told its U.S. employees Monday that it would impose a 47 percent pay cut for six weeks, beginning Feb. 23.

After that, some of their pay will be reinstated, with employees seeing paychecks trimmed by 20 percent at least through the end of June.

“It’s an alternative to permanent reductions in force,” company spokesman Rich Nelson said. “It allows people to stay employed, but we realize it imposes some hardships as well.”

Experts say that, until now, companies generally have stuck with the traditional reaction to money trouble by reducing investment and other expenses, and then, if that isn’t enough, eliminating jobs. When better times return, the companies can start hiring again.

But this recession, coupled with a financial crisis, the likes of which have not been seen since the Depression, has driven companies to use most of the cost-saving tools at their disposal, and the economy continues to contract.

It is only recently that companies have begun thinking of pay cuts, said John Bremen, global practice director of Watson Wyatt’s compensation practice in Chicago.

In December, FedEx Corp. said it would cut the salaries of 36,000 workers by 5 percent. Last month, Advanced Micro Devices Inc. said salary cuts of varying percentages would be made throughout the company. And last week, General Motors Corp. said it would cut U.S. salaried workers’ paychecks by up to 10 percent.

A Watson Wyatt survey of 117 companies across a range of industries in December found that 19 percent planned to institute salary freezes during the next 12 months.

When that same question was asked in October, it was 12 percent. Salary reductions were planned by 6 percent of companies surveyed in December, as opposed to 4 percent in the October survey.

Chicago Tribune