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IBM Riles Employees With Base Pay Cuts
Associated Press ^ | January 23, 2008 | BRIAN BERGSTEIN

Posted on 01/23/2008 9:42:02 AM PST by decimon

IBM Riles Employees With Base Pay Cuts By BRIAN BERGSTEIN (AP Technology Writer) From Associated Press January 23, 2008 10:58 AM EST

BOSTON - Even as IBM Corp. reports record profits, thousands of its U.S. employees are staring at pay cuts.

It's the result of IBM's response to a lawsuit in which the company was accused of illegally withholding overtime pay from some technical employees. IBM settled the case for $65 million in 2006 and has now decided that it needs to reclassify 7,600 technical-support workers as eligible for overtime.

But their underlying salary - the base pay they earn for their first 40 hours of work each week - will be cut 15 percent to compensate.

IBM spokesman Fred McNeese said the move would not save the company any money, because the affected employees generally should find that overtime pay makes up for the salary cut.

However, internal documents obtained by The Associated Press indicate that many workers will lose money.

These documents, prepared for managers who have had to break the news to their underlings, say that one-third of the affected workers - more than 2,500 people - generally do not work enough hours to make up for the 15 percent cut in base pay. IBM is offering a one-time "transition payment" to reimburse affected workers for the losses they suffer in the first three months.

One slide presentation says managers should try to spread assignments around so that more employees work enough to pass the threshold - 5 hours of overtime per week - at which their new time-and-a-half pay would make up for the reduction in base salary. But the document also acknowledges that "hot skills and customer commitments may limit (the) opportunity to redistribute overtime."

IBM's McNeese would not comment on the documents' specific points. He said IBM had been paying these technical-support people at "market rates," and to grant them overtime without a corresponding reduction in base pay would make them too expensive.

One document, labeled a confidential "Q&A for customers," lists this sample question that an IBM client might ask: "What has been the reaction of employees who are being reclassified?"

The suggested response for managers: "They understand this is something we must do under current interpretations of the law and to remain competitive within our industry."

It is clear, however, that many employees are furious.

They worry that opportunities to work more than 40 hours per week - the point at which federal law requires overtime pay for eligible workers - will be reduced now that IBM has an incentive to trim employees' time on the clock.

One 20-year IBM veteran who usually works 50 to 52 hours a week - enough to come out ahead now that she can get paid overtime - expects to see her hours reduced.

"Anybody who's been in IBM knows that when they look to cut costs, that's where they're going to cut it," said the employee, who spoke to the AP on condition of anonymity because she fears reprisals from the company.

Even if they make enough overtime to compensate for the lower base pay, the IBM workers' now-reduced salaries will carry corresponding reductions in what they are eligible for in life insurance benefits and vacation or sick pay.

"I was so angry I could hardly speak, and it takes a lot to make me angry," the longtime employee said. "I just don't know how IBM expects us to take this and just run with it."

Most of the affected workers make less than $100,000, according to Lee Conrad, national coordinator for the Alliance at IBM, a Communications Workers of America union local that represents a small percentage of IBM employees. The group is considering pickets at IBM sites to protest.

On the surface, it would seem a surprising time for any IBM employees to find their compensation going down. The Armonk, N.Y.-based technology company earned $10.4 billion in 2007 and just raised its profit targets for 2008.

But more and more, IBM is depending on workers other than the ones hit by this change. IBM owes much of its current success to its increasing emphasis on international markets and on cheaper overseas labor. IBM's U.S. work force has remained around 125,000 in recent years, even as the company's overall head count has risen with international hires.

The decision on overtime stems from the settlement of a federal class-action lawsuit in San Francisco in which 32,000 technical workers accused IBM of illegally withholding overtime pay.

IBM had considered the employees highly skilled professionals exempt from overtime rules as defined in the Fair Labor Standards Act. The plaintiffs alleged that they were not executive decision-makers or creative types who can be ineligible for overtime.

Though that case was settled late in 2006, McNeese said IBM needed until now to determine how to comply with federal overtime laws. "We still think it's ambiguous," he said.

---

On the Net:

Comments on union page about the cuts:

http://www.allianceibm.org/salarycomments.php


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: ibm
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To: jack_napier

1) People quit (what I did)
2) People become lazy and/or steal.

Both #1 and #2 should work elsewhere, obviously.
Welcome to the world market where one can find employees thankful to have your job for less.


61 posted on 01/23/2008 11:31:22 AM PST by Joan Kerrey
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To: jack_napier

“It doesn’t pay, Big Blue. This company has a moron management problem.”

I couldn’t agree more. I’ve outsourced two accounts and on my last one I and my partner were replaced by EIGHT Brazilians. I got laid off in May and saw it coming a year before that so I wasn’t surprised. I got treated to a great education in corporate manipulation for which I am grateful. When my manager called me to explain that I just wasn’t being very productive in spite of the 60 hour weeks I knew it was over and I had to laugh. Nine years of great reviews and all of a sudden “POOF” I’m a lousy employee. I got a good severance package though.


62 posted on 01/23/2008 11:35:10 AM PST by dljordan
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To: cinives
Nice: work 45 hours for the same pay as 40 hours used to supply.

I think the point was that these workers were having to work 45 hours anyway and were not eligible for overtime pay.

Usually workers stick it to The Man more than The Man sticks it to the workers.

63 posted on 01/23/2008 11:36:03 AM PST by HIDEK6
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To: HIDEK6

Yes, I know. But at least, as they noted, with the higher base pay they were “guaranteed” that much per week. Now, it will depend on their boss whether they make up the 15%.

Either way, at 45 hours they will be making the same as before. Of course if they work more than 45 hours they’re better off. The question is, will this happen ?

Net: uncertainty, resentment.


64 posted on 01/23/2008 11:41:07 AM PST by cinives (On some planets what I do is considered normal.)
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To: cinives
Nice: work 45 hours for the same pay as 40 hours used to supply.

This is a serious misinterpretation to what this article is all about.

The problem is that in IT, it's pretty rare to work a 40 hour week. That's why MOST IT workers are on salary. So the IBM employees were payed more than they'll get now that they've been reclassified as hourly pay employees. Their base pay for 40 hours of work will be less, but they would make the same as they were when they were on salary, based on "time and a half" overtime pay. But they're going to cut back on the number of overtime hours that these people work to cut labor costs. So they'll be earning less because they'll be working fewer hours.

I'm not defending the action of IBM. I just wanted to correct your interpretation of the article.

Mark

65 posted on 01/23/2008 11:43:36 AM PST by MarkL
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To: decimon
If you are so furious about it, go ahead and quit.

Whining legalistic jackasses, getting exactly what they wished for - and deserve.

66 posted on 01/23/2008 11:46:51 AM PST by JasonC
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To: bolobaby
Bring lawsuit, get burned.

That's how it always works. Long-time temp employees sued Microsoft, won, and got screwed.

67 posted on 01/23/2008 11:51:51 AM PST by antiRepublicrat
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To: bolobaby

IBM shouldn’t violate labor law.


68 posted on 01/23/2008 11:52:56 AM PST by em2vn
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To: Joan Kerrey

Ive always been told that there is always someone behind that is smarter, quicker, stronger, prettier, faster and willing to work for less than you get. Thats why I have such high work ethic (aside from FReeping at work)


69 posted on 01/23/2008 11:53:25 AM PST by ßuddaßudd (7 days - 7 ways Guero >>> with a floating, shifting, ever changing persona....)
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To: MarkL

Hell I AM in IT and have been for years. I worked at IBM for 8 years in the 80s - I know what that’s all like. I didn’t work a piddly 40-45 hours per week most weeks - my workweek, particularly when I was travelling, often ran 70+ hours with no overtime. It’s the reason I quit. I was well-compensated, but not that well.

I didn’t misinterpret the article. You did. IBM, by this action, just guaranteed that these employees MUST work 45 hours to make the same amount of money. Might it cause IBM to stop working these people 50+ hours like they did with us ? Maybe-probably - but in the 40-45 hour range, these people lose.

They took on IBM, and the 40 hour a week person lost.


70 posted on 01/23/2008 11:54:18 AM PST by cinives (On some planets what I do is considered normal.)
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To: brownsfan

“But, the Indians work and study harder. In fact, many of the Indian schools are better than US schools. Guess what? The Indians study management too. I think it’s time to hire Indian execs at 1/4 of the rate of pay of American execs.”

Yeah, the old myth, perpetuated by management and corporate interests, that Indians are super-intellectual hyper-workers. HORSESHIT! I’ve worked with many of them at IBM and they’re no smarter, better educated or harder working than Americans. They’re cheaper though!


71 posted on 01/23/2008 11:54:34 AM PST by dljordan
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To: AppyPappy
If you are routinely staying 50+ hours a week in the office, it’s your own fault. Most of the people I have met who work long hours are either great time-wasters or incompetent. I knew some senior VP’s who worked those hours but they are were unable to delegate so they attended a lot of worthless meetings.

I think that it depends a lot on your position, the sort of business and company you're dealing with, and the sort of job you have. Your generalization may be true for many executive positions. I don't know for sure, since I'm not an executive.

I do know that long hours are quite common in the IT world. It's just a part of "the nature of the beast." In my case, I'm part of a 3 man department of network administration, and we're responsible for over 200 servers and 600+ remote locations. Since we've got these stores located all over the country, in every time zone, our "production hours" are from 7:00am until 10:00pm, Monday through Saturday. The only time we can do maintenance is between 10:00pm and 7:00am (and from 10:00pm Saturday night through 7:00am Monday). Plus we need to be able to support users during the production hours. So 50 to 60 hour weeks are quite common for us (sometimes quite a bit longer), and this has been the case since I started in the IT world back in the mid-1980s. I'm not complaining, this is the career I chose.

Mark

72 posted on 01/23/2008 11:55:06 AM PST by MarkL
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To: brownsfan
But, the Indians work and study harder. In fact, many of the Indian schools are better than US schools. Guess what? The Indians study management too. I think it’s time to hire Indian execs at 1/4 of the rate of pay of American execs.

From a programmer's point of view, I work with lots of Indians and let me tell you, you're full of it. Indian programmers are NO BETTER than their American counterparts and the language barrier makes them worse.

73 posted on 01/23/2008 12:02:27 PM PST by SwankyC
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To: decimon
I've been salaried since 1980. The only time I've been paid for "overtime" was when my customer requested extended work weeks and agreed to pay straight time for the extra hours. That is very rare. My paycheck is the same whether I work 80 hours or 140 hours in a two week time card period. If I can't find at least 80 hours of direct chargeable labor in a two week period, I have to either fill the difference from my comprehensive leave or indicate unpaid time off. The latter option reduces my paycheck.

I've described the realities of working as a salaried software developer. Frankly, I've really felt ripped off by working all those hours and not seeing the compensation in my paycheck at the end of the pay period. That's the short term, get it now view. The long term is that my employer recognized the effort and rewarded me with bonuses, promotions and pay raises. My patience was rewarded. The larger paychecks come every two weeks instead of sporadically.

The day may come when the company books are audited and the uncompensated overtime is viewed as a liability due the employees. If that happens, the windfall will be nice. If not, no big deal.

74 posted on 01/23/2008 12:04:57 PM PST by Myrddin
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To: dljordan

Indians are not that great when it comes to communication. There is also that problem of them disappearing if someone offers them more money. When I worked on a project with them, they were good programmers but the functional staff complained constantly about the language barrier. It was not worth the savings. When the guy disappeared from our team, we had to spend time figuring out what he was doing.

People started insisting that all communication be done by email. That really irritated the Indian guys.


75 posted on 01/23/2008 12:06:00 PM PST by AppyPappy (If you aren't part of the solution, there is good money to be made prolonging the problem.)
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To: Joan Kerrey
Welcome to the world market where one can find employees thankful to have your job for less.

I'm not sure you understand; I'm saying the management would be better off to just fire everyone than to do that. It's cheaper to fire people than to cut their pay; because people who have a pay cut will stay on while they look for a job usually (they need the money to pay the bills), but now they're less attached to the job and moreover they feel like the employer has mistreated them, which gives them the mental justification to screw off, screw things up and sometimes outright steal. I'm not denying that there's a global market or that it provides downward pressure on wages and that's just reality. Just that there's a business reason to maintain wages; it invites ex talionis. People at IBM who I knew had stayed through 2 post bubble paycuts were awful for morale and certainly awful for productivity. The lab I was in, two guys got busted for stealing hardware. They didn't even get busted by IBM; they got busted by Intel when they found an engineering sample on eBay. It of course, had a serial number.
76 posted on 01/23/2008 12:52:07 PM PST by jack_napier (Bob? Gun.)
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To: The Electrician
Therefore there is no reason for them to take a pay cut.

Sure they are. If there's going to be some belt tightening that's going to cost some workers 15 percent of their base salary, executives should take a similar cut for the good of the company.
77 posted on 01/23/2008 1:07:02 PM PST by mysterio
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To: mysterio

You gifted at telling people how to run their businesses. How many people do you employ? How many jobs have you created? How many poeple are on your payroll?

We both it’s NONE.

When a quarter to a third of your workforce sues your business, you’ll know the position IBM is in. All this event does is precipitate IBMs final demise. It’s not like they produce products/software/services that can openly compete in today’s marketplace. They only exist today because of direct government contracts and flowdown contracts from other government contracts.

Mark my words, IBM will ultimately go under in a fashion similar to DEC within our lifetimes.


78 posted on 01/23/2008 1:26:48 PM PST by Diplomat
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To: Old Professer

I know this: I’ve been contracting recently and because of a lawsuit brought against MSFT, Im not allowed to contract for longer than a year. Look that one up.

A few people decide to sue (and make out) and everyone loses.


79 posted on 01/23/2008 1:27:02 PM PST by bolobaby
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To: bolobaby

You can only lose what you already have; not what you expect to get.


80 posted on 01/23/2008 1:37:54 PM PST by Old Professer (The critic writes with rapier pen, dips it twice, and writes again.)
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