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IBM hits back against over-timers with pay cut

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IBM's technical support grunts may have won the battle for overtime pay, but the company has cooked a major catch to its peace agreement.

Big Blue is now conceding that about 7,600 IT specialists and tech support workers (about 6 per cent of its US workforce) need to be reclassified as being eligible for overtime wages. But the company is simultaneously slashing the base pay of those employees by 15 per cent to compensate.

The salary cut is a result of a two-year-old dispute between the company and its techies about overtime wages. In late 2006, IBM payed $65m to settle a class-action lawsuit in which 32,000 current and former technical support employees accused the company of illegally withholding overtime.

IBM says it wants to comply with US labor law, even though it thinks overtime qualifications are ambiguous. Under the US Fair Labor Standards Act, some "highly skilled" white collar workers such as executives, administrative, professional and certain IT employees are exempt from overtime pay. IBM techies argued the company unjustly lumped its support staff into that category .

With the wage cut, IBM claims that because its tech grunts regularly work overtime anyway, paying less for the first 40 hours will let the company, and the employees, break even.

"Up until now, these people have been paid a competitive rate based on their skills," IBM spokesman Fred McNeese told us. "If we kept them at that salary, and you add the overtime to it, they would be paid an excess of competitive rates."

McNeese said without the change the overtime wage hike would fall on IBM customers.

The company asserts that this "changing the mix" will be cost neutral to IBM. Affected employees will "basically be making roughly the same before the change."

"That's a bogus claim they're making," said Lee Conrad, national coordinator for Alliance@IBM, a union that represents a small number of IBM employees. "They aren't going to be able to make it up."

Conrad said the company has recently been pushing back on the amount of OT allowed.

IBM said it won't discuss specific wages or the amount of overtime required for workers to compensate for the base pay cut. According to Conrad, the average affected worker made about $80,000 a year before the cut. With a 15 per cent reduction, their wages will fall to $68,000. That lands at around 5-6 hours of overtime needed per week.

Internal documents obtained by The Associated Press also indicate that one-third of affected workers don't work enough hours to make up for the cut. The AP's papers, however, also ask IBM managers to spread assignments around so more employees will make up for the wage reduction.

Conrad argues that the wage cut is unnecessary since IBM has been flourishing, even in a declining economy. The company earned $10.4bn in 2007 and expects earning per share growth to hit at least 15 per cent during 2008.

The company, however, has relied on workers in low-cost centers such as Argentina, Brazil, China, India and Russia to achieve such results. Some analyst have even speculated that IBM conspires to squeeze out US employees through unfavorable conditions, rather than rely on massive layoffs. Idle conjecture, of course.

The wage change will start on February 1, and will show up in IBM employee paychecks around the middle of that month.

Alliance@IBM is currently hosting a petition at their website and plans to picket in the near future. ®

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