ICT companies seeking pay cuts

In early 2002, many companies in the Swedish information and communications technology (ICT) sector are seeking pay cuts or freezes to help them adjust to more straitened economic circumstances. It is not certain that the employers will succeed in this aim, not least because pay in many longer-established ICT companies is regulated by collective agreements.

According to an enquiry carried out in February 2002 by the business editorial staff at Svenska Dagbladet, the conservative Stockholm daily newspaper, the management of about half of the largest information and communications technology (ICT) consultancy companies quoted on the stock exchange want to reduce the salaries of their staff. At least 10 of the 20 largest companies want to freeze or reduce pay levels during 2002. The goal for the businesses as a whole is to decrease their total wage costs by 10%. Furthermore, in 12 of the companies the managers say that they want to establish a closer relationship between pay and results, returning to the more flexible wage systems that existed in the sector in the 1980s.

Icon Medialab is one ICT services company currently negotiating with the employees about reducing pay and making it more flexible. 'Our pay agreements were signed at a time when all ICT companies were fighting to hire the right personnel. Now that the market has turned downwards we can see that the fixed salaries are too high,' said a management spokesperson at the firm.

At the end of 2001, the software companies Intentia, Telelogic and C Technologies announced that they were planning to reduce pay in 2002, at least temporarily. The broadband company Utfors announced a little later that it was going to do the same, as did the ICT consultancy company Know it. It is, however, far from sure that the ICT companies will succeed in carrying out the planned wage reductions. Many of the longer-established ICT companies have concluded collective agreements that limit their freedom of action.

Union response

The Swedish Association of Graduates in Law, Business Administration and Economics, Computer and Systems Science, Personnel Management and Social Science (Jusek) - a trade union affiliated to the Swedish Confederation of Professional Associations (Svenska Akademikers Centralorganisation, SACO) - represents professionals in sectors including ICT, where it has around 6,000 members. It has recommended to its members not to agree to wage reductions, as these may have a negative effect on their pensions, sickness insurance and wage guarantees in event of the company's bankruptcy.

Jusek, together with the Swedish Union of Technical and Clerical Employees in Industry (Svenska Industritjänstemannaförbundet, SIF), has recently prevented an attempt by the ICT company Softronic to persuade its employees to give up 10% of their pay in 2002. However, one Softronic employee was reported as stating that Swedish trade unions have a rigid way of looking at things and that companies must have flexible wage systems in order to cope with bad times.

SIF, which has about 15,000 members in ICT, has also recently brought a case against the ICT consultancy company Cap Gemini in the Labour Court (Arbetsdomstolen). Cap Gemini has, according to the union, been issuing redundancy notices to employees that it wants to shed due to a shortage of work, and not followed the legal rules on the order of priority in redundancies (SE9912111F). Cap Gemini states that the workers concerned in fact handed in notices of resignation.

If employers and the trade unions at local level and national/sector level cannot agree on reductions in collective agreed pay levels at ICT companies, the issue may be pursued in the ordinary way at the Labour Court. The Court will then judge whether there has been a breach of the relevant collective agreements or not. However, at workplaces where there are no trade union members, or where the employer is not a member of an employers' association, the employers and the employees may come to a mutual understanding without the help of the social partners. In the case of possible disagreements in such non-unionised ICT companies, it may turn out that the employees will seek to join unions. The unions have reported a rising interest in membership among ICT employees from 2001 onwards. In 2000, about 60% of ICT workers in the private sector in Sweden were organised, while a little more than 60% of the employees were covered by collective agreements of some sort (TN0108201S).

Commentary

Demands from ICT employers for pay cuts are strongest in those companies where there are no collective agreements (about 30%-40% of ICT firms in the private sector). However, the issue has also arisen in companies covered by collective agreements, and several managers have recently announced, prior to annual local pay negotiations, that they want a 'zero' agreement for 2002. Such an agreement would mean a reduction in real pay, according to SIF, as there will be no compensation for inflation. The ICT sector is undergoing a process of restructuring, but this should not be borne solely by employees, the union states.

If the local bargaining parties agree on a pay cut or freeze, this is permissible under the terms of national sectoral collective agreements, says Göran Trogen, managing director of the Employers' Association of the IT Trade and Industry (ALMEGA IT-företagens Arbetsgivarorganisaton). ALMEGA would also like to see future sectoral collective agreements affecting the sector setting no fixed general wage rise.

As the issue of reducing or freezing pay in bad times may be of interest to several other sectors with economic problems, the coming local negotiations in ICT and the responses of the trade unions will be followed intently. (Annika Berg, Arbetslivsinstitutet)