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Salary-cut: A corporate benchmark to survive?

Published : Saturday, 4 July, 2020 at 12:00 AM  Count : 641
Zia Uddin Mahmud

Salary-cut: A corporate benchmark to survive?

Salary-cut: A corporate benchmark to survive?

A new panic during the panic of corona pandemic for the private sector employees is salary-cut. The officials who are implementing this explained it as an adjustment of expenditure with down trend income for the better interest of the organization and for survival in the pandemic period. On the other hand, employees are deemed it as an inhuman behavior in the pandemic situation; just like another pandemic in the pandemic.

If you are in indifferent position and judge the statements of both the employers and employees, you may conclude that both are right in their position and decision. Again if you are very optimistic then you may opine that something is better than nothing means salary-cut is better than employee-cut, when cost reduction is a matter.

It is true that all kinds of organizations (Profitable or Non-Profitable, Government or Private, Large or small) will take cost-curtail approach in a situation when the roots of income going squeezed. That's why, as a part of it some employers inaugurate cost curtail by cutting the salary of their employees as they think that their highest expenditure is manpower cost. If they can cut a part of this cost, ad interim, they can stay in safe mood and will not break down.

So, recently we have seen that many corporate in different sectors have reduced a certain percentage of salary of their employees and the process is continuing. Though it is exclusively an internal matter of a corporate that what kind of strategy it will take to survive during and after the pandemic. But, the news of salary-cut in private sectors has becomes viral when few private Banks of Bangladesh have cut the salary of their employees.

This is a rare case indeed for the banking sector of Bangladesh and certainly shocking news for the bankers as it had never been their thinking. Though most of the Banks gave statement that they will not cut any salary of the employees. But, the question is that why most of the organization takes the decision of salary cut of the employees as a policy of survival in the pandemic? Whether the salary cut will give remedy to the organization to survive in the recession period?

Salary is a fixed payment to the employees by the employer against the services or works render by the employees. Most of the corporate has a declared pay-scale for the different level of its employees. When an employer hire an employee, the total sum of salary is settled between them and employee join by agreeing the salary and other benefit offered by the employer.

Different corporate in the same sector designed pay scale on the basis of their capacity as well as competitively with the peer corporate so that they can hire best employees who can serve best to achieve the organization goal. Pay scale is directly related with the employee motivation, employee turnover as well as productivity of the organization. Besides salary, an organization also offers other facilities like increment, festival and incentive or profit bonus, promotion etc. to its employees which are motivator for the employees for doing best performance and to reduce employee turnover.

So, though salary is a fixed cost of an organization, in other sense it's an investment of the employer against the employees, to earn profit. Because, it is the employees (manpower) who will materialize the goal of the organization and their individual and group performance will be the performance of the organization. And one of the main steroids for performance is pay scale and other fringe benefits paid to the employees.

It is a proved fact that a motivated employee's performance is beyyer than a de-motivated employee. In times of crisis, like the current pandemic, to face the challenges, employees have to put their best performance than ever and give more time for the organization. So, employee motivation is mandatory to get highest performance. These are the common theories of human resources management (HRM).

But, the practice is seen different than the common logics and theories of HRM. Due to pandemic, revenue earnings of the most corporate has declined drastically, even more than expected. Companies are eyeing that the effect of the pandemic will not fade out soon. Even they are suspecting that projected revenue earning may not be let them to stay in break-even. In this situation, to stay in break-even some fixed cost must be eliminated or reduced. But it is not easy to reduce any fixed cost instantly other than salary. That's why, many of the corporates, in an excuse or logic of survival in the pandemic reduced the employee salary.

The logic is questionable, when an established corporate takes such decision which has business age of more than 8-10 years and which has history of continuous of profit making from the beginning. Such type of organization (minimum business age 8-10 years) must possess the strength to run the business minimum 1-2 years in break-even or with minimum loss. That is tough for a new organization. Even, in the pandemic situation, an old organization will do better business than a new organization as the old organization already has a good market share.

I want to back to the mania of salary cut of different banks. Banking sector of Bangladesh is considered as the most well established corporate sector and amongst different employer, private banks are the top priority for the employees who loves career. So, practice of salary-cut and halting all other motivational benefits of this sector will create examples for the other sectors and may become a benchmark of survival. As employment opportunity of different sector will surely squeeze due to this pandemic, so some business organizations those are not truly in big problem, may take the chance of it and reduce the salary of its employees.

A company must consider salary-cut by keeping in mind the employees' motivation, because only salary-cut will not help them to survive. Motivating employees to get highest productivity in crisis situation is mandatory. If it is really necessary to cut the salary for the survival, let it explain to the employees logically and motivate them how the organization will compensate the salary-cut of the employees in present time and in future. Otherwise, it will deepen the crisis and may not help for the survival.
The writer is a banker & freelance writer

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