Voluntary executive pay cut

In the wake of the losses incurred by budget airline Cebu Pacific due to the coronavirus outbreak, its senior executives were reported to have voluntarily cut their salaries by 10 percent to avoid employee layoffs.Already foreseeing a loss of about P4 billion from the travel ban to countries affected by the coronavirus, the company’s bottom line is expected to get hit further by President Duter­te’s order to lock down Metro Manila until April 14.

The executives’ action was a pleasant surprise.

Often, when a company suffers serious business losses, its initial (or almost knee jerk) reaction is to terminate the services of as many employees as possible without adversely affecting its operation. With reduced operating costs, the company hopes it can stem its losses and, with some adjustments in its business plans, work its way back to profitability.

There is little the affected employees can do other than demand separation pay if their employer decides to downsize to save the business.

Labor organizations have complained that when a company’s chips go up, the managers get salary increases, but when the chips go down, the employees get pink slips.

Thus, it is a morale booster to employees when their managers, in the effort to cut costs, opt to reduce their pay instead of laying off staff or forcing them to go on leave without pay.

By voluntarily taking a hit in their paychecks, the executives gain stronger “moral authority” to call on the employees to go the extra mile in the performance of their assigned tasks so the company can get back on its feet as soon as possible.

Going through the executive pay cut route instead of letting go of some employees to minimize losses could also reap dividends for the company in the future.There is no assurance the employees whose services had been terminated would want to be reemployed by the company after the financial crisis has passed and the latter needs additional staff to attend to the increase in business activities.

If the company is unable to get back its former employees, it would be forced to recruit new employees and, in the process, incur training expenses.

After they have completed their training, they would be put on probation and closely supervised to make sure they satisfactorily perform their assigned tasks.If the new employees live up to the company’s expectations, fine: if not, their services may have to be terminated and, as a result, the time, money and effort the company had spent to train them for the job would go down the drain.

The company will not face that kind of obstacle if it makes every effort to keep its staff intact while it is going (at least, temporarily) through rough times.When the business gets back to normal, the “old” crew can simply pick up from where they were forced to end the last time and go full blast again with the operation.By taking a hit in their paychecks instead of laying off employees, Cebu Pacific’s executives spared themselves the emotionally draining experience of deciding who among their staff to let go.

Unless an employee has committed an act that justifies the termination of his or her employment, firing or asking him or her to resign is one of the most difficult decisions a manager, supervisor or executive has to make. A loss of job often results in the deprivation of financial support to the people who depend on the employee’s wages for their daily sustenance.

Based on official statistics, the average Filipino family consists of five members. Using this number as the standard, it is reasonable to assume that when a person loses his or her employment, four other people suffer financially in the process.

To the executives of companies that have been adversely affected by the coronavirus, please take a leaf from the saying, “[T]o whom much is given, much is expected.” INQ

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