Posted on 01/23/2008 9:42:02 AM PST by decimon
IBM Riles Employees With Base Pay Cuts By BRIAN BERGSTEIN (AP Technology Writer) From Associated Press January 23, 2008 10:58 AM EST
BOSTON - Even as IBM Corp. reports record profits, thousands of its U.S. employees are staring at pay cuts.
It's the result of IBM's response to a lawsuit in which the company was accused of illegally withholding overtime pay from some technical employees. IBM settled the case for $65 million in 2006 and has now decided that it needs to reclassify 7,600 technical-support workers as eligible for overtime.
But their underlying salary - the base pay they earn for their first 40 hours of work each week - will be cut 15 percent to compensate.
IBM spokesman Fred McNeese said the move would not save the company any money, because the affected employees generally should find that overtime pay makes up for the salary cut.
However, internal documents obtained by The Associated Press indicate that many workers will lose money.
These documents, prepared for managers who have had to break the news to their underlings, say that one-third of the affected workers - more than 2,500 people - generally do not work enough hours to make up for the 15 percent cut in base pay. IBM is offering a one-time "transition payment" to reimburse affected workers for the losses they suffer in the first three months.
One slide presentation says managers should try to spread assignments around so that more employees work enough to pass the threshold - 5 hours of overtime per week - at which their new time-and-a-half pay would make up for the reduction in base salary. But the document also acknowledges that "hot skills and customer commitments may limit (the) opportunity to redistribute overtime."
IBM's McNeese would not comment on the documents' specific points. He said IBM had been paying these technical-support people at "market rates," and to grant them overtime without a corresponding reduction in base pay would make them too expensive.
One document, labeled a confidential "Q&A for customers," lists this sample question that an IBM client might ask: "What has been the reaction of employees who are being reclassified?"
The suggested response for managers: "They understand this is something we must do under current interpretations of the law and to remain competitive within our industry."
It is clear, however, that many employees are furious.
They worry that opportunities to work more than 40 hours per week - the point at which federal law requires overtime pay for eligible workers - will be reduced now that IBM has an incentive to trim employees' time on the clock.
One 20-year IBM veteran who usually works 50 to 52 hours a week - enough to come out ahead now that she can get paid overtime - expects to see her hours reduced.
"Anybody who's been in IBM knows that when they look to cut costs, that's where they're going to cut it," said the employee, who spoke to the AP on condition of anonymity because she fears reprisals from the company.
Even if they make enough overtime to compensate for the lower base pay, the IBM workers' now-reduced salaries will carry corresponding reductions in what they are eligible for in life insurance benefits and vacation or sick pay.
"I was so angry I could hardly speak, and it takes a lot to make me angry," the longtime employee said. "I just don't know how IBM expects us to take this and just run with it."
Most of the affected workers make less than $100,000, according to Lee Conrad, national coordinator for the Alliance at IBM, a Communications Workers of America union local that represents a small percentage of IBM employees. The group is considering pickets at IBM sites to protest.
On the surface, it would seem a surprising time for any IBM employees to find their compensation going down. The Armonk, N.Y.-based technology company earned $10.4 billion in 2007 and just raised its profit targets for 2008.
But more and more, IBM is depending on workers other than the ones hit by this change. IBM owes much of its current success to its increasing emphasis on international markets and on cheaper overseas labor. IBM's U.S. work force has remained around 125,000 in recent years, even as the company's overall head count has risen with international hires.
The decision on overtime stems from the settlement of a federal class-action lawsuit in San Francisco in which 32,000 technical workers accused IBM of illegally withholding overtime pay.
IBM had considered the employees highly skilled professionals exempt from overtime rules as defined in the Fair Labor Standards Act. The plaintiffs alleged that they were not executive decision-makers or creative types who can be ineligible for overtime.
Though that case was settled late in 2006, McNeese said IBM needed until now to determine how to comply with federal overtime laws. "We still think it's ambiguous," he said.
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On the Net:
Comments on union page about the cuts:
http://www.allianceibm.org/salarycomments.php
IBM must have a lot of shoddy equipment then if they are routinely keeping everyone over 40 hours a week just doing “repair” work. When I was at AT&T, we could comp anything over 45. IBM is going to cut their pay.
Amen! What is really sad for IBM is that the top talent will flow to another company and what is left will have to work longer (for less) to take up the slack. Or ‘the beatings will continue until moral improves’ school of management strikes again!
B.S. I have been in the corporate/financial world for over 30 years, and I have seen a tendency for employers to continually add to the workload of exempt employees...and why not, if they don’t have to pay them? I have known many people who worked extra hours because that’s what it took to do the extra work, NOT because they were incompetent, loiterers, blah, blah, blah.
It’s this kind of behavior that gives rise to law suits and unions (which I loathe). If employers want to avoid those odious outcomes, they need to be conscious of maintaining equity with their employees.
The regularly expressed attitude of “just find another job if you don’t like what’s going on” is simply not in the best interests of the employer (not to mention the employee). Historically, employees and employers take as much advantage as each other as they can get away with, and to posit that employers are always the ones with pure motives is silly. If employers aren’t proactive in maintaing a fair posture with their employees they will expose themselves to legal action, unionization, and at the very least the continued cost of turnover. I say that as a member of management, but you just gotta live in the real world.
Well, let’s say they are paid $1.00/hr now, they get cur 15% and it drops to $0.85/hr; $40.00/wk vs $34.00 wk after cut; they work 5 hours @ $1.50/hr plus the 40 hours and the gross is $40.375; the new scale actually gives them 1.009 of their old pay.
But they worked an extra five hours for the privilege.
I notice the usual members of the Perpetually-Offended club are all over this one. Grade school must have let out early today.
We’re all in this together; when one guy loses, everyone loses, when one guy gains, the rest lose, right?
I’ll bet you think that dumbass kid down the street that ran up a hospital bill of $100,000 after crashing with no insurance and not wearing a helmet was taken directly out of your lifetime earnings, too.
Do you want to see my ball of string?
Everyone knows people who waste time in the office, however your generalization not withstanding, the only folks I know who think the only reason people put in more than 40 hours is because of laziness are execs and middle managers.
A lot of folks put in a lot of hours to make up for understaffing and frankly, flat out management incompetence. Poor management is the number one reason for long hours in my experience, bar none.
Of course the managers are never the ones who have to do the long hours due to their ineptitude, but they make damned sure their superiors think those “lazy malcontents” that raise their issues up to them about the mismanagement of the project are viewed as just lazy whiners.
Cause...meet effect.
I wouldn’t like the IBM situation at all. I don’t mind putting in my 40 hours, but anything over that makes me grumpy.
One thing that companies should never do is hire time consultants. We did at Sara Lee and it was a disaster for management. The FIRST thing they recommended was that we cut the number of meetings. It sounds good but meetings are a chance for managers to preen and demonstrate their authority. There was never any need for technical people (like me) to be there. I was one of the people who left every day at 5PM. The difference between me and the people who left at 7PM was that I never attended meetings. My time was completely spent on productive work. My cowowrker was the same way. Every other department had 5 programmers and we only had two. Later it changed to one. We were able to do that because we sat at our desk and worked.
When I went to a larger company, we had to endure 3 hour meetings with 40 people in the meeting. 40 people!!! You can’t do anything with 40 people in a room. We ended up getting coworkers to page us out on our beepers so we could go back to work.
Are the CEO and the VP’s going to see a cut?
If not, why not?
Classic management club response to comments about their project schedules.
You must be a very good manager, your observations are spot on.
They will most likely get raises for coming up with this plan.
Sadly, no sarc tag can be used here.
I'm not saying the labor law is right, just that many, many employers aren't following it very closely.
Bwahahahah!!!
Pray, does it talk?
Exactly - many years ago - I worked for the most ‘successful’ high tech firm in NE - their strategy, which they proudly announced to customers - was to provide employees with home computers (and other ‘goodies’)so they could ‘extend’ the workday, and they would just ratchet up the workload to make it happen. If anyone couldn’t adjust or objected, well new, younger, cheaper workers were always around to replace them.
It worked. Of course, the company eventually failed - and was absorbed by their biggest rival(which had its own set of problems which almost destroyed them) - executive management, including the founding ‘genius’, all had beautifully rich golden parachutes!
I will never work for a larger company again.
One of my previous employers was a large, regional bank. The meetings were as you described - huge chunks of time wasted with way too many people. I recall several meetings which ended up being for the sole purpose of scheduling other meetings.
Oddly, a few jobs later I ended up as a consultant at the very same bank. I still got pulled into meetings, but since they were billable hours, I frankly didn’t care. What I noticed, however, was that the company had hired a bunch of talented technical people. Then they took those people and subjected them to meetings upon meetings to the point that more than half the day was spent somewhere meeting about something, and the rest of the time was spent following up on the previous meeting or preparing for the next. They ended up hiring me and my consulting peers to do the jobs that their regular employees were hired to do, and wanted to do, but weren’t allowed to do.
Obviously, in that environment, cooperation with consultants doesn’t flow freely, which just meant that more consultants were hired on. It was a huge cluster fiasco.
It finally got so bad that our company started pointing out how this was costing them boatloads of money and our staff was getting tired of doing “in-house” work when we all wanted to work in our own specialties.
I left shortly after Y2K to go inhouse somewhere else. I doubt much has changed and from my peers in the business, just about every large organization has various degrees of similarity.
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