Against the sweep of layoffs on Corporate America, a few companies have taken pains to explain efforts to keep employees on their rolls. The latest, FedEx, announced a series a steps to “minimize job loss” while slashing costs.
The package delivery and logistics giant, noting that it is facing “some of the worst economic conditions in the company’s 35-year operating history,” said it has cut base salaries for a wide number of individuals. The cuts start with CEO Frederick W. Smith, who is taking a 20 percent reduction, while other senior executives will see their salaries reduced by 7.5 percent to 10 percent.
The company has also instituted a 5-percent reduction for remaining U.S. salaried exempt personnel.
Employees will feel other pain, including the elimination of calendar 2009 merit-based salary increases for U.S. salaried exempt personnel and the suspension of 401(k) company matching contributions for a minimum of one year, effective Feb. 1.
FedEx, in also reporting a 3-percent second-quarter profit increase, said these additional actions are expected to reduce expenses by $200 million during the remainder of fiscal 2009 and about $600 million in fiscal 2010. “In addition to these actions, each operating company is evaluating other measures should business conditions further deteriorate,” it added.
Earlier, the company already had eliminated variable compensation payouts and instituted a hiring freeze and other labor-related expense reductions. It also had cut personnel at FedEx Freight and FedEx Office previously.
Among other companies to favor pay cuts over layoffs, flat-rolled steelmaker AK Steel earlier this month announced a salaried employee cost reduction program that will install a 5 percent pay reduction for salaried workers effective Jan. 1. The company cited the unanticipated and major downturn in the economy, which has resulted in sharply lower demand for some of the company’s products.
It said that the pay reduction will affect all salaried employees, including the company’s CEO and all executive officers.
AK Steel said that it plans to implement other salaried workforce cost reductions, including freezing the defined-benefit plan for salaried employees and replacing it with a defined contribution retirement benefit, and offering temporary incentives for voluntary retirements. The temporary retirement incentive program will end on Feb. 6, 2009. That company, which currently has about 1,500 salaried employees, also said that it could not rule out the need for involuntary salaried job reductions if the pay reduction and voluntary retirements do not produce adequate cost savings.