Earning the right to start complaining

Several years ago, there was an unfortunate incident around the Morgan family Christmas dinner table. I nearly choked on my lunch.

I should point out ­ for fear of incurring my mother’s wrath ­ that the cooking was not to blame. Instead, my gagging resulted from the chutzpah of my sister’s then beau, a merchant banker, who had stormed into the room, sulking like a child denied a top-of-the-range Transformer. The reason for his anguish? His Christmas bonus wasn’t what he’d hoped ­ what with it being a paltry four times my entire income for that year.

So for all those who argue that the latest storm over bankers’ bonuses has all the hallmarks of naked envy, I think back to that Christmas dinner, and am reminded of the divisive nature of wages.

Few subjects create friction as readily as pay, and the reasons are fairly clear. Employment is one of the few areas where we are given explicit statements concerning our worth to another party.

The link between pay and employee morale should not be underestimated. Because although some workers will complain about the unfairness of the eye-watering bonuses being paid to bankers, it is fundamentally an issue that does not affect people’s day-to-day life. Start messing with their take-home pay and you’ll see a real fuss.

Take, for example, technology vendor HP. On the back of some disappointing financial results, it announced an across-the-board pay cut for all its staff ­ or at least all its staff working in countries with labour laws that allowed them to do it. In other places, such as the UK, staff are being consulted about the proposal.

There is some sense in HP’s approach ­ though I would suggest that cutting wages is a last resort, and find it difficult to conceive that HP could not have devised other cost-saving measures first.

Nevertheless, for better or worse, its management looked at the options of redundancies or pay cuts and thought the latter was the better option.

And it is not just HP that is trimming wage bills. BP recently emailed its employment agencies to let them know that from March it would be paying IT contractors 10 per cent less for their work.

These examples might not be indicative of a widespread trend, but they are worth taking note of. With the economy in turmoil, the prospect of a significant period of deflation looms, and that could make salary cuts a reality for many.

Faced with falling prices for goods and services, business leaders may conclude that staff numbers cannot be reduced further and have to consider cutting wages. I suspect many firms would take BP’s approach, at least initially, where any pay cuts are targeted at contractors and not employees. But ­ on the ultra-gloomy side ­ all staff could ultimately be affected.

That is likely to be a bitter pill for staff to swallow. And managers would do well to consider the psychological impact ­ staff would effectively be told their work is no longer as highly valued as it once was. That need not be calamitous, but it needs careful handling.

The HP example provides a lesson in how not to go about it. When making painful decisions, it can be useful to convey the message that the team is in this together. HP tried to do that by announcing that its chief executive, Mark Hurd, would take a 20 per cent cut in his basic salary, compared to his staff who were taking a five per cent cut.

That gesture looked less laudable when bloggers drew attention to Hurd’s remuneration package. The announced cut equates to about $290,000 off a basic salary of $1.45m ­ but Hurd’s complete package last year was worth $42.5m. Suddenly, that looks less like taking one for the team.

And there’s the rub ­ sensitivities about pay really become inflamed when people start feeling they are being treated inequitably.

By Gareth Morgan