For Firms That Cut Wages, Keeping Workers A Worry

Employers are usually reluctant to cut wages because they worry it might demoralize workers. But this downturn was so bad many were desperate for extra ways to shrink costs.

Some businesses imposed furloughs or fewer work hours; others tried a straight wage reduction. But many of those companies are now concerned about hanging on to their employees.

Airplane pilot Justin Gillmor is on the verge of leaving a job he loves. He has been flying for as long as he can remember. His father was a pilot, and as a kid, Gillmor tagged along in the cockpit. He has flown with Comair, a connecting service for Delta, for almost 10 years, starting as a first officer and working his way up to captain.

Then, the recession hit. The airline downgraded about 150 captains — including Gillmor — back to first officer. His pay was reduced from $67 to $42 an hour, and he began working fewer hours. Now, his wife brings home their primary paycheck.

Seeking Better-Paying Jobs

"It puts a lot more pressure on her to make a certain amount of money," Gillmor says. "I love the aviation industry; I love flying. I don't want to quit, but I might have to, just for the sake of my family."

Becky Gillmor, who is an accountant, says the couple is struggling to pay their bills.

"We're about ready to start a family, and we're very scared about how we're going make it work," she says. "I have definitely postponed the family longer than I probably should have according to my doctor."

Becky Gillmor is encouraging her husband to find a better-paying job. That trend is worrying a lot of employers.

Companies Worried

"Seventy percent of companies say that they're very concerned about losing high-performing employees or employees in key roles," says Ravin Jesuthasan, head of the rewards division at Towers Perrin, a consulting firm.

Jesuthasan oversees a survey of about 300 businesses. The latest edition of the survey has some good news: More than half of companies that froze or reduced wages this year say they plan to give raises again in 2010.

Jesuthasan says it will probably be a while before those employees are making what they were before the recession. But if businesses want to hold on to their best workers, he says, it's important to have a vision of how to make that happen.

An Innovative Idea To Retain Workers

Michael Casper, president of UltraSource, a ceramic microchip manufacturer in Hollis, N.H., had just such a vision. At the beginning of the year, his company's profits fell into the red, and he had to lay off 30 workers. But that wasn't enough. He cut the rest of his employees' pay by 10 percent, but he did it with an exit plan.

"We put a profit goal in front of everybody, and we promised that if we hit a certain profit level, that people would get their 10 percent back," Casper says.

That was at the beginning of March. Before April came around, the company had reached its goal.

The product his company makes is fragile: If someone drops it, it shatters. Casper says managers helped employees understand that what was acceptable in the past was actually working against the company. The result: Within a short period, the company cut its scrap rate in half.

Casper says he has been trying to minimize that scrap rate for years, so he decided to take this new incentive system a step further. He told the workers that in addition to earning their 10 percent back, each month they could share a bigger piece of the company's profits.

"I have been operating this company for 18 years, and I saw the most dramatic employee enlightenment that I've ever seen," Casper says.

Now, not only are employees earning back their reduced wages; some months they are making more than they did before the reduction. UltraSource has had such a rebound, Casper has been able to hire back some of the workers he laid off.

He says none of that would've happened without his experimental pay cut.

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