Cutting income

[Architect]

At my company income is being cut. This is a relatively old, prosperous technology company, which survived the dot.com and after 8 years since then is lean and mean (and profitable). But recently they cut the company bonus, cut the stock purchase plan, and froze all raises etc. Back of the envelope says my income is about 15% lower at minimum. They also mentioned that outright pay cuts were considered, but taken off the table at this time. This is extraordinary, and highly deflationary.

Anybody seeing this elsewhere? If it gets legs then we will be in for a peck of fun.

 

[Achiever51]

Been there, done that, lived to talk about it as a retiree, but then I'm a survivor of the auto industry in southeastern Michigan and have lived through more angst than I care to even remember!

 

[youbet]

Also been there and done that. I retired from a telecommunication/electronics company where the kind of take-aways you mention have been going on for several years. Profit sharing - gone. 401k match - reduced. Retiree health care - gone for new hires. Bonuses - smaller/sometimes skipped. Raises - sometimes given only for the subsequent year, then cancel. DBP pension - gone for new hires. Severance pay - reduced. Probably a few more I can't remember since I've been retired for over two years.

 

[bbbamI]

Yes. This happened at my MegaCorp. I've been gone for 10 years and it started just a few years after I left.

 

[Architect]

Yes I've seen it before too, but not to this degree, and to have it happen now is interesting timing. I'm just wondering by straw poll if it's at all more widespread.

Anybody seeing it this year?

 

[FIREd]

So far my wife's 401K match has been reduced by about 20% this year. No other cuts. This year's bonus seems pretty safe right now. As far as raises/pay cuts, we won't know until Q1 2009.

I think that 2 employee benefits are definitely in danger over the next few years: the 401K match and the ESPP. I think that DW's company would prefer layoffs rather than across the board pay cuts.

 

[Notmuchlonger]

At my company income is being cut. This is a relatively old, prosperous technology company, which survived the dot.com and after 8 years since then is lean and mean (and profitable). But recently they cut the company bonus, cut the stock purchase plan, and froze all raises etc. Back of the envelope says my income is about 15% lower at minimum. They also mentioned that outright pay cuts were considered, but taken off the table at this time. This is extraordinary, and highly deflationary.

Anybody seeing this elsewhere? If it gets legs then we will be in for a peck of fun.

No, but my interest is in the medical field. I know nurses are getting raises and bonuses. Supply and demand i guess. Eventually when they get enough nurses that will stop too.

 

[Rambler]

Here at megacorp, bonuses are based on a formula that is pre-determined and therefore we do not and cannot back out of them. If performance matches the target communicated at the beginning of the year, the bonus gets paid. If the target is not met, then per the formula it is paid pro-rata, or not paid if it does not meet the minimum threshold. That said, the company can be profitable and not pay a bonus. We do not pay bonuses based on "being profitable". Its only paid based on achievement of target.

That said, I am tryimg to restrict overtime. If they do it, we pay it. But, I am asking the managers to sharply reduce it, based on the level of work their dept has to accomplish. Hey, if the orders are down, it should not take the same amount of time to produce x-20% widgets as it takes to produce x widgets...correct? In fact, availability of raw materials is even better than it was before, at better cost, with better timing, so our production should take even less time. Alas, in some areas of asia, including this one, if the boss does not go home neither do the worker-bees...so getting the managers to go home is a key driver.

Bottom line is that I like paying bonuses, and I like paying fair wages. My incentives are mostly tied to the same performance targets as my people have (sometimes my targets are even higher, and I also have a stock price component - nothing from that this year), so if I can pay them a good bonus, it usually means I will be smiling too.

R

 

[chinaco]

Well, right now you are stuck.

One way to look at it is if you think you were being overpaid relative to the industry. If so, you are adjusting back to normal.. If not, the company is belt tightening on your dime.

The important part right now is to have a job (if you need to work). So I would not worry about the cut and be thankful to continue working. But it is a wake-up call for those who are not LBYM.


Another consideration is that companies have only a few choices to manage their bottom line and cash outflow... cut everyone's compensation, cut capital spending, or lay-off. If they lay-off... you might have to pick-up the slack of other workers.


Your company being a technology company is probably highly dependent on supporting customers and creating the next thing... keeping people, continuing some R&D investment and cutting wages is a preferable way to remain prepared for the next business cycle.

I would expect the wage loss to be temporary if they were not overpaying you already.

 

[wrigley]

I've been working for a company that deals primarily with government (military) contracts in the training field. This year has been the most financially productive year in the company's 30 year history. I'm concerned about the future once the Dems take over!

Mike

 

[Ronstar]

I'm part owner of a civil engineering company, and we froze all raises in 2008 (and 2009), cut owners pay 5% Jan 2008, laid off about 30% of staff, and looking for other ways to cut costs. Many companies I deal with are doing the same things.

 

[lucija]

Yes I've seen it before too, but not to this degree, and to have it happen now is interesting timing. I'm just wondering by straw poll if it's at all more widespread.

Anybody seeing it this year?

Yes... nothing new, though.

Both, my DH & I were told "no bonus this year". No specific announcements have been made, but we're not hopeful about getting a raise next time around. DH's company said it "will make every effort to provide a yearly 401k match" - translation, it will not happen, but they don't want to make an announcement just yet. His company also kicked off a round of layoffs and mine made an announcement stating we're "in good position at this time, but will be aligning ourselves to match future sales/revenue streams" - translation, layoffs are coming.

A lot depends on what industry you're in... For us, the party has started!

 

[Alan]

We'll find out about salary increases Q1 next year but a freeze or minimum increase will not be a surpise.

We already know that the bonuses will be greatly reduced. We have a formula fixed at the start of the year, and 50% of the bonus is based on the megacorp meeting its profit targets.

With business as bad it is we are pleased to still have jobs. (2 of our biggest customers are the construction and automotive industries).

 

[Moemg]

I've also been there & done that . One year they would cut raises , overtime and threaten layoffs . The next year they would be begging for nurses so back to overtime and decent raises.

 

[old woman]

We all got exactly the same raise 4% starting a week ago. Today my boss asked me how we did bonuses last year and I showed him they were added to paychecks as bonuses because they were too large to hand out cash. We did $25 each for the workers a few years in cash but last year was $100 each for workers and with nearly 200 that is too much cash to hide in misc expense. Foremen, managers and admin and some others get more so have always gotten the bonus on checks if we even had one. Profits are way up and cash flow is amazing so bonuses should be good and profit sharing the full 15% that is our max. Every year they add a note to the raise saying health insurance went up but they haven't had to have us pay part of the cost yet.

 

[UncleHoney]

Bonus? What's a Bonus?

Never got one of those.

Thirty five years in the salt mines and I never got a Bonus.

All we ever got at the end of the year was a form letter with some chicken scratches on it..........telling us what our pension was going to be worth some day. :

 

[barbarus]

I've been working for a company that deals primarily with government (military) contracts in the training field. This year has been the most financially productive year in the company's 30 year history. I'm concerned about the future once the Dems take over!

Mike

Don't worry just yet Mike. Remember the Dems love war even more that the Republicans, (and that's saying something). You're in a good business from a financial viewpoint. A long time ago, a few, "tin foil hats" denigrated war industries as somehow immoral, but certainly no one feels that way any longer, so either party is going to support going for the jugular, each in its own way.

You might see a little slowdown for a while, but whoever is in power will realize the lauditory economic stimulus of war, even if it is an internal affair against a restive American citizenry.

Keep your eyes open for temporary downturns, but don't lose any sleep either!

 

[Midpack]

Our business is off 30%, we're in a mature (slim margin) business. For the first time in our company's history, there will be no bonus for this quarter or next. Compensation from loss of bonus will range from about -5% for an hourly worker to -75% or more for Officers. We have refused to layoff anyone, but we've cut production hours such that base pay for hourly workers has fallen 10-15%. Frankly, I expect we'll be forced to do layoffs or even a plant closing by March if not sooner unless this economy starts to recover soon - unfortunately that doesn't seem likely to me. At age 54, this is the toughest economic environment I've ever seen - and I don't know how/when it ends yet.
Along with many others I suppose, FIRE is no longer realistic...

 

[Hamlet]

I work for a technical consulting company. At the height of the boom, we got bought by a big dumb telco company. They ramped us up to about 50 people in our local office, gave us all extra vacation, bonuses, retirement funding, etc.

When the tech meltdown occurred, they started laying people off, etc. Eventually, they sold us to some rich Silicon Valley guy for next to nothing. Our office had about 15 people by then. All of the perks went away. We also all took a 5% pay cut.

The company returned to profitability and was sold to another big telco company in 2006. They appear to be a little less dumb.

So far it hasn't gotten near as bad in my industry as it did in 2001-2003.

 

[DangerMouse]

The company I worked at up until a few months ago has had to make drastic changes this year. First they cut the 401k match to zero, then when medical was renewed up the contribution for anyone not on HMO. Bonus has been cut for 2008 and not likely for 2009 and now everyone is being told they will be taking a pay cut from 1 January. Companywide probably 50% of staff have been let go over the past year and I would say over the next 6 months more will lose their jobs.

 

[FIREd]

According to this report, it looks like real wages could decrease by 0.5% next year in developed countries:

ILO warns of cuts in real wages for millions of workers in 2009 – Declines follow decade in which wages failed to keep pace with economic growth [Press releases]

 

[tryan]

My Megacorp cut hours rather than pay. Pretty well received. Especially since bennies kept rolling in.

We just had less to do for the same billable rate. Seems to me if your pay is cut then the rate of the service should also be cut thereby raising the amount of work coming in (in the long term). Problem being, I think lots of companies just lower the labor cost without lowering the product/output cost (producing a loose-loose situation, in the long run).

 

[Architect]

This is what I'm fearing. Sure what happened at my company is just one employer, but it's extraordinarily unusual, they've never done this much before, especially during a time when the company is still doing well.

According to this report, it looks like real wages could decrease by 0.5% next year in developed countries:

ILO warns of cuts in real wages for millions of workers in 2009 – Declines follow decade in which wages failed to keep pace with economic growth [Press releases]