Former presidential candidate Tan Kin Lian has suggested that imposing temporary salary cuts may have been a better solution to cut costs than resorting to mass retrenchments, in a Facebook post aimed at Singapore Press Holdings (SPH).
SPH cut 230 jobs recently, with 130 of them being retrenchments. There was an outcry from certain quarters when it was leaked that the media company intended to hire foreign correspondents after the retrenchments.
Sharing his experience of having to cut costs during the economic recession in the early 2000s, Tan shared that he chose to cut every staff member’s salary by 10% instead of retrenching 10% of the staff.
The salary cut was imposed on each staff member, including the CEO of the company.
Tan also gave the staff one month of paid leave every three years, during the recession.
The businessman who ran NTUC Income for 30 years said:
“My approach was to share the pain equally. I did not wish to have to retrench some of the staff, because they have families to feed.
“When the economy recovered, the salary cut was restored. And the one month of paid leave was removed.”
Tan added that his staff was able to cope with the salary cut, since the cost of living went down during the recession. He further said that while some staff chose to leave and secure better positions with better compensation, a majority of his staff chose to stay on.
Ending his post urging big companies to consider this model of cutting costs, Tan suggested that SPH specifically could have utilised this approach instead of resorting to mass retrenchment.
Tan further asserted in response to a Facebook comment on his post, that suggested that SPH is different since some jobs have become obsolete due to social media and digitisation, that:
“It does not matter what is the cause of the excess manpower. It is better to cut salary and working hours. Spread the pain. Over time, some employees will find new jobs or the economy will recover, and things will get back to normal.”
During the dotcom burst and the economic recession in the early 2000s, I have to cut down expenses by 10%. Instead of…
We re-publish his post in full, in case you cannot read it above:
During the dotcom burst and the economic recession in the early 2000s, I have to cut down expenses by 10%.
Instead of retrenching 10% of the staff, I cut everybody’s salary by 10%, from the CEO down. i gave the staff one month of paid leave every three years.
I cannot remember if the salary cut was 5% or 10%, but my approach was to share the pain equally. I did not wish to have to retrench some of the staff, because they have families to feed.
When the economy recovered, the salary cut was restored. And the one month of paid leave was removed.
Fortunately, during a recession, the cost of living went down. So, the staff was able to cope with the the salary cut.
Some staff were able to find other jobs on their own at better pay. So, they were not worse off. But the majority stayed on and rode through the tough times.
I hope that big companies can consider this method of cutting cost, instead of resorting to retrenchment. Perhaps SPH could have adopted this approach?