No pay-cuts at IBM SA

By Christelle du Toit for IBM
Johannesburg, 12 Sep 2008

Unlike some US-based IBM staff, local employees of the global IT giant will not have to take salary cuts to help the company weather tough market conditions.

However, a local economist warns that SA should take note of what is happening overseas.

IBM has confirmed reports that employees at two of its sites in the US - systems and technology group workers, as well as its integrated supply chain unit employees - face salary cuts of up to 10%.

"IBM continually reviews its business practices based on cost competitiveness and market analysis," says the company in an official response to questions from ITWeb. "We are taking this phased action to address cost and pay competitiveness, and to reflect the pay practices of other companies in the IT industry."

It adds: "Eligible employees will receive a one-time salary adjustment to their base pay to assist in mitigating the loss of earnings."

However, the company insists the matter does not relate to its operations in SA.

IBM did not give any details as to what makes an employee "eligible" for a pay cut, or how unions are being engaged on the matter. However, sources close to the process indicate workers were given the choice of taking the pay cuts, or facing retrenchments, something IBM has not denied.

IBM`s international revenue, for the period ended 31 December 2007, was $98.7 million, compared to $91.4 million in the previous financial year. In the 2007 financial year its sales general and administrative expenses rose to $22 million, compared to $20.2 million in the previous financial year.

IBM is not the only company that is feeling the pressure of the global economic downturn.

Internationally, technology company Siemens is cutting nearly 17 000 jobs, with no news yet on whether the downsizing will include its workers in SA. At least a third of the layoffs will be incurred in Germany.

AMD has said it will not retrench domestically, although it plans to downsize its global workforce by 10% - totalling nearly 2 000 jobs.

Local implications

Economist Tony Twine says IBM`s pay-cuts are an unusual step to take, but notes that it seems "entirely sensible" to both management and staff, and both parties "retain some of what they invested in each other".

He says it sends a message that the US economy as whole is "on the rack" as IBM does not only sell to consumers, but into the commercial and industrial space as well, as is the case in SA.

The pay-cut move is, therefore, something that raises concern for SA. However, Twine is quick to point out that, while SA`s economic woes have moved in broad parallel to the US`s problems, there is no direct link between the two matters - "we managed to create our problems ourselves".

The strain consumers are facing across the country is already moving into the business community, he says.

"So apart form the international links, we just have to be aware of the problems in consumer markers, due to the general over-indebtedness."