Any advice - need to cut staff wages

Employer101

Hi all, I am hoping someone here can give me some advice on how best to tell staff that i need to cut there wages,
myself and my wife run a small business with 3 employees, we pay our staff a reasonable wage, the lowest is on 12ph, with an additional couple of days off over christmas without effecting AL, its not a career or record breaking salary or anything but there good paying low skilled jobs.

Last years accounts we lost just over 6000 This was due to bad debts but we had a provision from the year before which softened the effects. If it werent for the bad debts we would have had a profit. We took those bad depts on the chin a bit and worked threw it, but this year we have just lost a big a/c and have been caught for another 15K.

After this 15K well things need to change and I dont know how to go about it, like everyone else we are caught for cashflow and our first demand letter arrived in the post today, We have enough to cover it today and the cheque is already gone to them, but if it had come last week we wouldnt have had the money, last week we had to put money into the business for the first time in years just so we could get stock from another supplier,

Every single line is being examined from labels to packaging tape, but we cant look at everything while ignoring wages, looking back we could easily have hired the last girl for 9 or 10ph but instead started her on 12, so how now do i pull them all in and tell them we are circling the drain and its all hands on deck or else abandon ship, cause they are a good bunch of workers and I dont really want to lose any of them.

R3al

If you explain the situation to the staff, they will probably realise that everyone in the business needs to chip in and do what they can to ensure the business survives, after all a small pay cut is better than no job at all

stephendevlin

3 day week and they can claim for the other 2. They are still making 3 days at a high wage and jobseekers for the other 2 days.

Its seems to be the norm these days. rather than letting people go.

That is if you can still operate with the staff on a 3 day week

[Jackass]

If it's a case of how do you tell them / convince them, just be honest. I mean, they must all know about losing a major account, as well as perhaps some of the bad debts, and if not, tell them.

I mean, there's no point in your business going down the drain because you over spend on wages, be apologetic about it, tell them you hope it's just temporary, but that things are now a struggle.

They may take it and stay loyal, they may look for another job, but if it's low skilled and you can pay 9 p/h, I'm sure you can find someone else if someone leaves, that's just life, but the business has to come first, or you're all out of a job.

DubTony

You may have to bite the bullet on this one. Personally I'd be looking at saving one full wage per annum. This would give you a bit of breathing space. How you do that is up to you but it will take a bit of negotiation. Putting all staff equally on a 3 day week will save you about €28k a year plus PRSI contributions. So it works out. However there are some challenges with this approach. Employment rights specify that any employee on short hours can be entitled to redundancy payment after a given period of time.

From here Page 13 www.employmentrights.ie

10. Employee’s Right to a Redundancy Lump-Sum Payment by reason of Lay-off or Short-time (Form RP9)
This can arise where an employee has been laid off or kept on short-time or a mixture of both either for four consecutive weeks or for a broken series of six weeks where all six weeks occur within a 13 week period. The employee, if he then wishes to claim redundancy payment must serve a written notice (Form RP9 is available for this purpose) stating that he intends to claim because of lay-off or short-time, or give his employer notice in writing terminating his contract of employment (Form RP9 may be used for this purpose). The employee does not have to serve either of these notices as soon as he has been laid off or kept on short-time for either of the periods mentioned above. He can wait longer, if he chooses, but if the short-time or lay-off stops and if he does decide to claim, he must serve a notice not later than four weeks after the lay-off or short-time ceases. After that, he is debarred from claiming a payment in respect of that particular period of lay-off or short-time.
An employee who claims and receives redundancy payment due to lay off or short time is deemed to have voluntarily left his or her employment and therefore not entitled to notice under the Minimum Notice and Terms of Employment Acts 1973 to 2001.

Any employee who is with you less than 104 weeks, or possibly worked 104 weeks, isn't entitled to redundancy payment so you could work that in there somewhere (get advice on that). Rotating short-time and trying to avoid the situation where staff can claim redundancy is difficult with the short qualification periods in the legislation. But even doing that would be unlikely to save enough money.

It might just be time to leave your soul at home and do the crappy thing to save the business. The problem is that you're not going to save all the money at once, so you'll need to talk to your suppliers about making staged payments for anything you've been caught for.

That's the practical side of things. The crappy work is that meeting. Personally I'd simply spell it out to them. Here's the problem. "We've done what we can to cut costs, but I need to save wages." Ask for their thoughts and ideas. Apologise, but be clear that there are no other options. You can only save so much on staples and sellotape. If they're a tight bunch they may come to agreement between them that might be enough. But at the end of the day, it's in your hands. And I wouldn't be shy about mentioning the appropriate numbers either. It does help to bring it home to them.

Awful situation. Hope things pick up soon.

maxer68

Its quite simple especially in a small company as the taff will be alot closer to you and wil, probably understand the difficulties a lot easier.

Call them in for a meeting, explain as you have done in the OP. Tell them what you have done so far to cut costs (hopefully including cuts to your salary). Tell them you have to enforce a 15% pay cut across the board for the next 12 months and it will be reviewed next June.

But at the same time give them an incentive to work and say if sales move back up or reach a certain target the pay cuts will be reversed.

sawilson2003

DubTony wrote: »

However there are some challenges with this approach. Employment rights specify that any employee on short hours can be entitled to redundancy payment after a given period of time.

Short-time only comes into effect if hours or pay are reduced to less than half of their normal weekly amount, therefore a 3 day week should not trigger any entitlement to redundancy unless pay rates are reduced also.

TheCostumeShop.ie: Ronan

Since it's a small company call a meeting explain the whole companies financial and swiftly explain that staff costs need to be reduced, hopefully this will be short term. If you can bench mark money in from last month against the previous year and be open as possible. I'd suggest ending the meeting with targets, if we can bring in X amount of business then we can get the wages / hours back up to where they are now.

Even have a brain storming session at the end on other area's you might be able to cut costs on with an attitude of if we together can either bring in more money or decrease money going out we can get back on track to sharing the left over money in the pot.

Make a chart of the goals and stick it on the walls. Keep everyone up-to date on your progress or lack their of and celebrate every little win in terms of new business with them to keep morale high.

amen

I'm sure you have done this already but have you looked at moving your phone/electricity supplier? Do you have bottled water in the office? Change water supplier( or remove altogether)?

If you are going to cut wages then make sure you cut then enough. No points in cutting back to 11e per hour then in 12 months time having to cut back to 10e per hour. You would be better going straight to 10e per hour.

Are you sure that cutting wages will work though? You need to be sure that you think the company can survive until the market recovers. If not you might be best to go now.

Employer101

Thanks for all of your replies, meeting is tomorrow so at least I am going in armed with all of this advice,

The staff know there is a meeting tomorrow, and well they have all asked is it about wages and is there job safe, so at least they know what to expect, The hard part is going to be looking them in the eye and giving it to them straight,

maxer68

Employer101 wrote: »

Thanks for all of your replies, meeting is tomorrow so at least I am going in armed with all of this advice,

The staff know there is a meeting tomorrow, and well they have all asked is it about wages and is there job safe, so at least they know what to expect, The hard part is going to be looking them in the eye and giving it to them straight,

It should be easy enough as they obviously know there are difficulties.

The fact that you are not looking at cutting staff and instead cutting wages, might be of benefit.

Also, off the option of short-term short-time to anyone who wants it - you may have someone with youg children who might like to work 3 days a week til september.

And also, VERY IMPORTANT, ask for their ideas to cut costs and get extra sales!! And possibly open the meeting to say that no jobs are at risk. - gets the atmosphere better very quickly.

amen

Well how did you get on?

Employer101

How did we get on, well after the wife finnished off chewing my ear for thinking net wages and not gross wages, we went down to the factory and brought them all in to the office one by one, the first two were fine being the last in, but the last guy was hard as nails, which to be fair we had expected, and there was a bit of negoitation to do, but thanks to the wife hitting me over the head with the gross wage amounts, we were able to convince him that his gross wage was very high by industry norms, and we were able to reduce it by 100 a week, so between wage cuts and hours cut we were able to save 250 a week, and I am putting in 150 a week, so thats 20K a year, and hopefully that with all the other cost savings we should be ok,

Bringing in a rule that no consumables can be bought without 3 quotes, and talking to all of our resale suppliers about extending credit terms so by cost cutting and leading and lagging, then things might become easier, also speaking to bank about better fee terms, which will hopefully save a 100 or more a quater if we can play hardball.

Probably the worst part of the job, actually found it worse than firing, only had to do that once in 15 years, but was so mad, that i actually enjoyed it when it happened,

Still i hear on the news near 150 jobs gone in waterford, and 30odd with the news of the world, so maybe the best day to cut wages is when other people are after losing theirs,

votecounts

at least you were honest, many businesses would have fired a person and hired a slave, i mean an intern.

Employer101

votecounts wrote: »

at least you were honest, many businesses would have fired a person and hired a slave, i mean an intern.

God I hope the wife doesnt see that, she is the "Intern",

mikemac

Am I right in saying the first two accepted the cut and the last guy spoke up and negotiated so took a smaller cut?

laughter189

Few quotes for consumables is important , because no matter who you buy from , you will find that there are cheaper companies out there , and only buy the amount required , as some people get fooled into bulk buying .

Ensure that all purchase orders are signed off by you or your wife before it is issued .

Could you talk to your staff about becoming ' internal sales reps ' , and if they have any ideas on how to increase sales , to share it with you .

Kinetic^

Can I ask what industry you're in? If you don't want to post it publicly, you can PM, if you want to let people know at all.

Employer101

not really, the first 2 took a cut but werent happy, and it couldnt have gone any deeper but when the loss of hours comes in after the summer leave, well then they will really see the effects, as the last in neither wanted to be left go by seeking more than the other, and thats why we got them in one after the other so they didnt get to speak to each other.

The last guy is our longest serving employee, and wasnt taking a cut without a fight, and as we had given them the heads up he had his strategy laid out, so we went in knowing what we were aiming for, and what we should start asking for and I did the negotiating untill it matched what we originally wanted, We actually ended up only giving in by 10 a week, but thats where the wifes tactics on the gross wages came in as everytime he said im on x now we kept telling him he wasnt that he was on y, and that y is too much for this day in age.

As i said, horrible job, but if i didnt do it, well then we would be having a different discussion

Employer101

laughter189 wrote: »

Few quotes for consumables is important , because no matter who you buy from , you will find that there are cheaper companies out there , and only buy the amount required , as some people get fooled into bulk buying .

Ensure that all purchase orders are signed off by you or your wife before it is issued .

Could you talk to your staff about becoming ' internal sales reps ' , and if they have any ideas on how to increase sales , to share it with you .

We are in the retail supply chain, and sales really isnt the problem, cash flow is, so we are really concentrating on maintaing our debtors list and doing credit checks on new customers, we only made a loss last year due to bad depts, and this year we have already lost a big account taking with it the 15K that was owed to us, companies we have happily dealth with for several years are just closing their doors,

My new mantra is a sale isnt a sale untill you get paid.

Kinetic^

Get in touch with the ICMT, I recently attended a talk they did and it was very good.

HellFireClub

Employer101 wrote: »

As i said, horrible job, but if i didnt do it, well then we would be having a different discussion

We'd be having a different discussion altogether if I was in your shoes. Did you say above that you are putting in 150 Euro a week, and adding that to 250 Euro a week in savings made?

That's 7,800 Euro PA of your own money that you are using to subsidise a business that is losing 7,800 Euro year.

If I was in this situation (and I was in the past), I'd bring the whole thing back to wherever it has to be, so that you are not losing money like this. If someone has to be let go or more hours have to be cut, then that's what has to happen I think...