Employees accept pay cuts at Hewlett Packard

In early July 2001, the German subsidiary of the US-based computer and printer group, Hewlett Packard, called on its employees to accept voluntary cuts in pay or holidays to help compensate for a current downturn in profits. While the IG Metall metalworkers' trade union asked workers to reject these demands, about three-quarters of them agreed to the management's initiative.

At the beginning of July 2001, the management of the German subsidiary of the US-based computer and printer multinational Hewlett-Packard (HP) send a letter to each of its 5,700 regular employees, in which it asked them to join voluntary cost-saving measures aimed at helping the company to manage its current downturn in revenues and profits. The initiative is part of a global campaign launched by the HP headquarters in Palo Alto, California, calling on its 90,000 or so employees worldwide to participate in a global "voluntary payroll savings programme". Under this programme, all employees have been asked to choose one of four options:

  1. to accept a 10% pay cut for four months, from July to October 2001 when HP's new fiscal year begins; or
  2. to accept a 5% pay cut until October 2001, plus a renunciation of four days of their annual leave, or
  3. to accept a renunciation of eight days of their annual leave; or
  4. to refuse both pay cuts and renunciation of holidays.

Regarding the fourth option, the management emphasised that participation in pay or holiday cuts is voluntary and that those employees who refuse to take part will suffer no disadvantages. According to the HP chief executive, Carly Fiorina, however, more than 80,000 employees agreed to the cost-saving measures, which will help the company to save about USD 130 million over the rest of the current fiscal year.

In Germany, HP management announced that 94% of employees answered the letter, of whom 80% agreed to the pay cuts or renunciation of holidays. This means that around three-quarters of the German HP workforce supported the management's initiative, helping to save around DEM 15 million. In addition, the management itself agreed to a 15% pay cut over the same period.

The HP initiative was sharply criticised by the IG Metall metalworkers' trade union. In a press release, the union's local organisation in Stuttgart called the company's call for pay cuts "embarrassing and abstruse" and strongly asked the employees to reject them. According to the responsible IG Metall official - and employee representative on HP's supervisory board - Uwe Meinhardt, it cannot be accepted that a sound company should cut pay or holidays just because of a drop in profits. Mr Meinhard sees the HP initiative as a dangerous step to make pay totally dependent on short-term performance, as a result of a more and more dominant "shareholder-value" orientation. For HP in Germany it has been relatively easy to introduce the pay cuts because the company is not covered by any collective agreement, since it is not a member of an employers' association and the rate of trade union membership among HP employees is very low.

Despite the great readiness of HP employees to accept cuts in pay or holidays, at the end of July 2001 HP headquarters announced the "elimination" of 6,000 jobs, or 6.5% of HP's global workforce, which should help the company save another USD 500 million. Although there are no concrete figures available on what the job cuts mean for every national HP subsidiary, rough calculations indicate that at least a few hundred jobs will be affected in Germany. In the end, there might be numerous employees who will suffer both the cut in pay and the loss of their jobs.

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