The following is a letter from Kent Tan to The Online Citizen.
I read the article by Gerald Giam (“Billion dollar profits but still axing jobs“) with great interest. I am not good with words, therefore I [will] use numbers to support what I want to say.
For simplicity sake, let’s take that a company is made up of 1 CEO, 1 Manager and 4 Executive, and their monthly wages are tabulated as follows:
Now that the company face a downturn and in hope to cut cost, say 10% of the operating expenses. One of the common approaches is retrenchment, as shown below:
But is it the only approach available?
Should the head of the company make some sacrifices for the sake of his employees’ livelihood as shown in scenario 2? Afterall, getting $21k per month is still 10 times more than what his executives are getting.
Or the company can try taking a salary cut altogether to help the company tide the wave as shown in Scenario 3, so that everyone can keep their rice bowl.
If you are the head of this company, which approach would you take?
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Thanks for the letter Kent.
I have always wonder whether Singaporean companies can do job sharing here. In Australia, workers job-share due to various reasons. Maybe they want a more relaxed pace of life or they have kids to handle so they prefer work half a day at half the salary.
Job sharing allows one to carry on working so that his experience is still valid and more importantly, he is still working though he earns lesser now. It is still better than being retrenched and join the unemployment line.
When the economy improves, the worker can then switch back to a full-day full salary work schedule.
Most companies here will only think of chopping workers at the first sign of trouble.
Dear Kent,
To be fair to the govt, over the past few years, it has been calling for companies to introduce a component into their employees’ paychecks. This component is known as the Variable Component.
A percentage of the worker’s basic salary goes into this component. This was introduced as a measure to help companies not to lay off its staff when the economy is not good. It also helps the worker in that he need not be laid off.
It is similar to scenario 3. For companies which have adopted this arrangement, retrenchment would be the very last resort.
Don’t ask me about DBS though. I cannot tell you how come they were so quick to lay off 900 of its staff.
Your solution will work for very very small companies like the one you illustrated.
But for Medium and Large enterprises, it becomes totally unsustainable.
Imagine a CEO who gets $100k a month, if he is willing to take a 50% paycut.. and contribute $50k a month to other workers…
How many workers can he subsidize?
Some will still need to be let off.
The problem about scenario 3 is that any pay cut, execs will leave and one has difficulty trying to find new staff to do the job (at the lower pay). Even if one can find new staff, the company loses the experience.
Laying off is actually the worst. Cos the staff who stays have to do double and more likely to leave. But its easier to replace such a staff cos the budget for pay is higher and also the new staff is clueless about how much work needs to be done.
Ask Boss to take pay cut? lol. Very effective career terminating move.
re: isa
which is why i also bring in scenario 3, with everyone in the company getting less in a relative manner, not just the top man himself.
especially for SME, some top managements are getting wages equivalent to 30 times what an executive is getting, excluding bonus.
Unfortunately job sharing is only workable if both persons do the job at roughly the same capability / speed. If you do it better than your colleague, it’d seriously suck to have to handle everything they didn’t. Or if you do it worse, they’ll be the ones cursing you.
MOM Website
Monthly Variable Component ((MVC) forms part of monthly basic salary. It is
to be included in computing overtime payment and CPF contribution. For
MVC to be an effective mechanism for wage adjustment, the Tripartite
partners recommend that MVC should form 10% of monthly basic salary.
The percentage of MVC should preferably be the same for all levels of
employees.
MVC is a “standby” component to be used by employers to bring down
wage costs in sudden and severe business downturns to survive and save
jobs. Putting in place MVC also prepares employees to be more prudent in
making their financial planning and commitment.
In January 2004, the Tripartite Taskforce on Wage Restructuring strongly
recommended companies to implement wage restructuring to ensure that we
can stay competitive during short-term crisis, as well as in the long term,
when faced with intense competition from developing countries in the region.
Wage restructuring is not about cutting wages. It is about increasing flexibility
by having greater variability in wages, enhancing competitiveness by ensuring
that wages reflect the value of the jobs and the contributions of employees.
Like the author, I also do not understand the following:
1. When no company will disclose fully, what is the reliability of accountant’s report? what does audit report tell you when there is special purpose vehicle and special accounts ? What is the effect when some information is not disclosed? How can companies make use of special purpose vehicles legally?
2. Why billion dollar profit companies retrench? Why hikes all round when oil has dropped 100% in price?
3. why some getting 0th world pay? guess what this means ;)
4. why 90% of the people whose pocket burnt a big hole do not petition?
5. Why people Apathetic?
6. Why people accept all hikes?
7. who foots the bill eventually when companies using poor management who boo boo big time investing using the stakeholders money? Why no one accountable? Gimme a job like this lah. At least I will be accountable a bit leh.
8. what has opposition said and done and what answers have they gotten? What is the REALity of them?
8) I hate Apathy
This place we are in is also known as Seventh Heaven.
They are so high on PAP propaganda that they are like the skin on our bodies. They cannot just strip them off without feeling the pain and most people are afraid of pain.
Reponse to #4 who wrote:
“Ask Boss to take pay cut? lol. Very effective career terminating move.”
That’s what makes a manager and a leader. That also differentiates the kind of company which grows with its workers, versus those who take the easy way out looking at the bottom line profits and dollars only.
There are intangible disadvantageous in firing workers. Low morale, process re-engineering and re-work, existing employees to take on further workload to cover retrenched colleagues, etc.
Yes in Australia, people do take a co-worker approach. Some may offer to take leave of absence to keep the job. The AU union and labour is strong and usually non-government affliated.
Can’t say that for .sg.
Kaffein
Singapura oso got union for workers wor.
The great NTUC wor.
hee hee … 1st world wor. :)
All senior management should take a pay cut of at least 50% which still left them more $ than a junior employee. Or let’s start by having all civil servants not to take bonus this year & also to take a pay cut.
most times than not, the company will take the easy way out because most workers (those who are non-unionised) in singapore have no right. the labour legislations in singapore is really for the employers, not workers. i think even workers in developing countries like China & Vietnam have more protection than us