India’s biggest firm, Reliance Industries, has decided to cut salaries by 10 per cent in its oil and refining divisions. Several smaller companies like Kajaria Ceramics have followed suit with cuts as high as 40 per cent for those earning more than Rs 50 lakh.
Chief executive officers (CEOs) of Indian companies are facing a Hobson’s choice, which is cutting salaries.
As cash flows remain blocked for the eight consecutive week due to the lockdown, they are under pressure to either cut salaries or risk the future of their companies.
While several large-sized conglomerates including the Aditya Birla, Essar, and JSW groups have resisted any salary cuts to date, many mid-sized companies have done so.
But at the same time, in their communication to employees, CEOs have promised to restore the cuts when cash flows improved.
“The priority is to preserve jobs,” said Kamal Khetan, chairman and managing director (CMD), Sunteck Realty, a Mumbai-based real estate firm.
India’s biggest firm, Reliance Industries, has decided to cut salaries by 10 per cent in its oil and refining divisions.
Several smaller companies like Kajaria Ceramics have followed suit with cuts as high as 40 per cent for those earning more than Rs 50 lakh.
Most of the salary cuts have been reported from the sectors that witnessed zero cash flows in April and May.
The revenue streams of airlines, hotels, media, and automobiles have dried up.
Among the airlines, IndiGo has decided to cut salaries of its senior employees from May and also implement a “limited, graded leave without pay program” for May, June and July, CEO Ronojoy Dutta has said.
Senior pilots in SpiceJet have to forgo salaries for April and May.
Despite zero sales, CEOs of several real estate companies said they were not cutting salaries.
“We have not taken any decision with regard to job or salary cuts as yet,” said Vikas Oberoi, CMD, Oberoi Realty.
“We want to see what the government does and then probably take a call.
"But we are going to use this time to prune up teams and make them more accountable and efficient.”
Sunteck Realty said the company had enough cash to pay salaries till the end of May.
“Instead of wasting time at home, we asked our sales team to use the web to sell properties.
"We did receive a few bookings of affordable homes via our site, which was a morale booster,” Khetan said.
Emami has decided to make deferred payments to its employees in accordance with grades and levels, but not for those whose compensation is below Rs 10 lakh a year.
Exide did a 15-30 per cent salary cut in its upper-middle management.
According to a company communication reviewed by Business Standard, the company’s managing director and CEO, Gautam Chatterjee, has opted for a 30 per cent cut while the people in the director, president and vice-president grades will forgo 25 per cent.
The general managers and the deputies in this grade will have a 20 per cent reduction in salary and the senior managers and personnel 15 per cent.
“The need is to work on sharp reduction in our fixed costs. This calls for a little sacrifice.
"We will have to take a 15-30 per cent pay cut at selected upper levels,” a communication signed by Chatterjee said.
In the pharmaceutical sector, no major firm has yet announced a pay cut.
A source in a large group said pharma sales had been going on and they did not see a major dip in demand for at least chronic medicines.
“For acute therapies, there has been a dip as people stay indoors and contract fewer infections.
"Also, there has been some supply-chain disruption and delay in new introductions.
"Revenues have been hit, but only companies facing a liquidity crisis are doing salary cuts.
"So for sectors like hospitality it is probably unavoidable,” he said, adding that the wage bill was higher for services sector companies.