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.
---
On the Net:
Comments on union page about the cuts:
http://www.allianceibm.org/salarycomments.php
Wrong: prior to the lawsuit, we could contract ad infinitum. After the lawsuit, we are limited to one year.
Loss of opportunity.
I like the broken window fallacy better:
Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son happened to break a square of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—”It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?”
Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.
Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier’s trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, “Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen.”
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.*
In either case, such loss (or gain) is non-quantifiable.
Tech employees are billable to the client site. Executive salaries are charged to the corporate budget. If the contract says the company will be paid $80/hr and you are paying the person $95/hr, the contract is a loser.
I agree with your sentiments here completely. This story to me is a classic “dog bites man.” IBM has problems which go much much deeper than just this labor strife issue. I’m surprised they still employ over 100,000 Americans today.
. . .
At the very least, they shouldn't get a raise or bonus for pushing through their brilliant plan of cutting everyones' salaries. If there's going to be painful belt tightening, it should go all the way up.
Your responses appear to indicate that you did not 'grok' the article properly, and so your conclusions are based on fictions rather than facts. This is not a "belt tightening" exercise, rather it is a reaction to a lawsuit - if the company had not taken this action or similar, then the result would have been that they would then have been paying far over market rates for the set of employees in question, which is surely a 'go out of business strategy'.
They are not "cutting everyone's salaries", rather that is simply hyperbole. The move affects about 7,600 out of a total of about 125,000 US employees. The total compensation for some of those employees will actually increase, but perhaps not as high as the windfall that they had hoped to reap as a result of winning the lawsuit 'jackpot'. Others may see decreases in total compensation. If that makes them unhappy, this being a free country, at least for the time being, they can 'walk out the door', or they can improve their skills and find a better position inside the company.
The lesson here is to be careful of what you ask for - because you might get it. Wanna bet that some law firm made out really well, but the cannon fodder employees that they used as their entree for filing the lawsuit may end up taking unexpected cuts in their take-home pay.
Oh, and for full disclosure, I was an IBM employee for more than 20 years, and I was not one of those managers that you seem to despise. I left because I wanted to try my hand at entrepreneurism. It's a tough world out there - I've gone two years without a paycheck - but I'm planning to make up for it many times over with the 'stuff' that I've built over that time...
Not always! I work 65 plus hours a week because the work is here. Most of our employees work at least 50 hours a week and no one tells them they must work extra. We are a small company of highly dedicated, highly paid professionals.
Last year our little company earned over $450,000 per person. The employee bonuses were huge. Most bonuses equaled or exceeded the employees base salary.
My W2 tells me I am not a sucker and I am definitely not a slacker. We make more decisions and do more in one week than most any companies our size do in a month. I may be a workaholic, but at least I am a well compensated workaholic.
We are a highly motivated group and we do not have job descriptions, but we work our asses off. The best way to describe our company can be found in a book called Good to Great by Jim Collins.
Basically, if the company is run correctly the employees will determine the direction and success of the company. It comes down to hiring the right people in the first place, removing obstacles to accomplishment and treating them fairly.
Again, I'd have to dispute that - they were hired for a job, knowing full-well that they were going to receive straight salary and benefits, but were not eligible to get paid overtime. That's exactly the basis under which I was hired (and I accepted those terms of employment just as they did - nobody held a gun to my head).
So, one or more of those employees got greedy and decided after the fact that they didn't like the terms of the agreement under which they were employed (that they had previously agreed to). (Or, more likely, they were spurred on by greedy union goons salivating over the thought of organizing thousands of highly-paid technology employees (and their union dues, and the power that it would bring to those few at the top of the union), not out of concern for the workers, but rather, as with most union organizing efforts, out of the not-so-enlightened self-interest of the union organizers themselves, the union bosses, et al.)
They got some lawyers and a court to change things, hoping or expecting that they'd reap some extra compensation above and beyond that which they had agreed upon, while mistakenly thinking that IBM would simply end up giving everybody more $$ for the same amount of work that they were already doing. Instead, they ended up messing around with everybody else's livelihood and work life. Just one more example of "killing the golden goose".
How about if they take a cut proportinal to everyone else?
“From a programmer’s point of view, I work with lots of Indians and let me tell you, you’re full of it. Indian programmers are NO BETTER than their American counterparts and the language barrier makes them worse.”
Ok, try to put your emotions aside and follow along. I’m a DBA by the way, and there is no speciality that has more Indians than DBA.
Anyway, the argument that management uses is that Indians are smarter and harder working. The fact that Indians are cheaper is generally glossed over by the suits. So, I’m using their own argument to ask why Indians aren’t hired for management. It loses something to say, they’re not as good, not as well trained, but they are cheaper.
I know it’s a hot button, but you’re programmers for crying out loud. Logic is your profession.
So you’re workaholics. Which is fine if you want, but I prefer being home with the wife.
My emotions went to the side, but I think you’re logic did too. I have clue what you’re talking about. Are you addressing my argument?
I'm not sure whether you understood the article.
"Everyone else" is not taking a pay cut. Rather, a group of 7,600 employees out of the approximately 125,000 IBM employees in the United States is having their base pay reduced by 15%, however they are now eligible to earn overtime pay on top of that base pay, whereas previously they were not eligible for overtime. As a result, some of the employees in that group will see an increase in their total compensation, and potentially a very large increase. Some will see little or no change. Others may see a decrease in their total compensation, which could be as much as 15% of their previous base salary, or it could be less of a decrease depending on individual circumstances.
It's not clear from the article whether the 7,600 employees whose base pay is being cut are "Systems Engineers" in the marketing division or some other job category. If indeed they are "Systems Engineers", then my experience during the seven or eight years when I was an IBM Systems Engineer was that they were not eligible for overtime pay, however it was normal for the compensation plan for Systems Engineers (as well as that for Marketing Reps) to be reset at the beginning of the year - and from time to time that total compensation plan has been tweaked to include more or less salary risk for the employees along with a corresponding potential upside opportunity available upon meeting certain business targets, bonuses, awards, etc. The description provided in this article sounds somewhat similar. If this group of employees does not consist of Systems Engineers, however, then I am not familiar with the details of their past compensation plans.
Regardless of whether or not they are Systems Engineers, the upshot is that some will earn more, some will not see much or any change, and others will see a decrease in their earnings. So your basic premise and your apparent unhappiness at the fact that the CEO and VPs are not going to see a cut in their own pay is both illogical and a total non-sequitur.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.