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The proposal of a 20% salary cut across the board at EOH is among the most drastic moves a JSE-listed company has announced as businesses try to cope with the adverse effects of the novel coronavirus.
Woolworths and Mr Price have also announced that executive management and/or board members will be taking pay cuts.
But EOH, which announced its results for the six months ended in January on Tuesday, is looking beyond management. The only staff members exempted will be those earning less than approximately R250 000 per year.
The IT group is still consulting with its employees and clients about the proposed cuts – which will be over and above the 25% pay cut the group CEO and its executive committee have agreed to. CEO Stephen van Coller estimated that the company would finalize such consultations this Thursday. He said the pay cuts were aimed at avoiding retrenchments and layoffs.
"This wasn’t a top-down thing. It was lot of staff coming and saying they want to do something for SA Inc," said Van Coller during the webcast with investors.
He said workers saw it plausible to keep 100% of the staff employed at 80% capacity rather than letting 20% of EOH's employees go out of jobs. He said it was important for the company, too, to retain all its employees so that when the economy turns, it won’t need to go out and try to recruit the talent it could lose.
How will the pay cuts work?
Van Coller said if the consultations are successful and the pay cuts are implemented as envisaged, some of the employees will work four days a week, especially those in businesses with reduced demand. For those who will continue to work the same number of hours as before, EOH will look at topping up their reduced cash salaries with non-cash remuneration such as extra leave days and awarding company shares.
"Personally, if I think; this is a very unfortunate thing that every company in South Africa should be doing. We should all be making sure that we save as many jobs as possible because when we come out of this, to have 20% of all the workforce now retrenched because people were looking after themselves, I think it’s just a wrong thing for South Africa," he said.
Van Coller said he’s been talking to several IT companies in countries like Spain and Italy who are going the same route and predicted that it’s only a matter of time before more local companies follow suit.
What are workers' options?
Andrew Levy, labour lawyer and managing partner at Andrew Levy Employment, said no employer can unilaterally cut workers’ salaries as these are fixed by binding employment contracts. But, this can happen if it’s part of what companies and workers or their representative unions agree on during retrenchment notice consultations.
"The people can agree that they will take a salary cut, a four-day week or any sort of other arrangement. The key is that they agree because the employer cannot impose a salary cut," he said.
Levy said the other option, which is better than retrenchments but would see some people temporarily lose their jobs, is implementing temporary layoffs. Under this option, workers who are temporarily out of work can claim from the special Unemployment Insurance Fund’s (UIF) Covid-19 Temporary Employer-Employee Relief Scheme.
Under this scheme, employers that are unable to pay the full salaries and are forced to lay off staff due to the lockdown can claim. Companies in financial distress and forced to close operations for a period of three months or less as a direct result of the Covid-19 also qualify if they are registered with the UIF among other things.
"At the end of the day workers have to decide and say, 'We are all in trouble here. Isn’t it in our interest to try and cooperate with the company in the short term so that we can have jobs in the long term?'
"I personally think it’s in everyone’s interest to cooperate. This is a short-term disaster," said Levy.
