Why aren’t salary cuts by employers during crises like the one we are in now focused on only salaries of highly paid employees like senior managers? We understand why salary cuts have to be made during this time but do not understand why salaries of workers who earn peanuts, were already struggling to meet basic needs before Covid-19 crisis, and are highly demotivated by poor pay would be cut. Wouldn’t cutting only salaries of top managers who take home heavy packages and allowances be a way of management showing junior employees they understand what they are going through and that the sacrifice is a sign of solidarity with them, appreciation for their work and motivation?
By the time any business considers and implements salary cuts for its employees, it means that it has been pushed to the wall. Many organisations by the time they start tampering with employees’ salaries (which have serious legal implications) they have cut all non-essential expenditures to almost zero, and this may include some of the allowances you are referring to.
I have written on these pages that businesses and all enterprises, the world over, irrespective of size (SMEs or Corporates) have been brutally traumatised by the Covid-19 pandemic. Many have overnight lost their main revenue streams. For such businesses whose revenue streams have in some instances disappeared or dwindled to trickle, salary chopping or even laying off workers becomes the only option for their survival.
Now, in all fairness, when implementing salary cuts, the formula used should be progressive, to ensure equitable impact to all employees. This means that those earning in higher salaries should be impacted with higher percentages than those earning less. Denis, you should realise that when performance of any business takes a downturn, everybody is affected, including the shareholders whose capital is eroded by the losses the company is making. Therefore the losses in earnings should impact all stakeholders (employees and shareholders) equitably.
However, I know of some business whose revenues dwindled due to COVID-19 but decided not to cut salaries of employees earning less than Shs1m. This was done on humanitarian grounds to protect the lower end employees’ purchasing power.
Head of Human Resource,