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HP imposes staff wage cuts

Mark Hurd lowers the floor to save workers

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Hewlett-Packard workers fired up their PCs this morning to find a long memo from Mark Hurd explaining why he was imposing wide-ranging pay cuts in an effort to prevent further job losses at the computer vendor.

The move followed HP’s first quarter earnings report yesterday in which it posted a double digit dip in printer, server, and PC sales.

HP CEO Hurd told employees yesterday that no more jobs would be axed for the foreseeable future. Instead he applied salary reductions across the board.

He said he will take a 20 per cent base pay cut: "I'll be asked by investors, 'Where's the job action, where are you taking out this roughly, 20,000 positions?' Well, I don't want to do that. When I look at HP, I don't see a structural problem of that magnitude," he wrote to staff in an internal memo seen by The Register.

"There are pockets where restructuring needs to happen, and areas where actions will be taken as part of our ongoing workforce optimisation process. But at a company-wide level, I don't believe a major workforce reduction is the best thing for HP at this time."

Executive council members will have base pay trimmed by 15 per cent; other execs will see base pay reduced by 10 per cent; “exempt employees” base salary takes a five per cent hit; and “non-exempt employees" base pay drops 2.5 per cent.

It looks like US employees will see their pay packets shrink straightaway, but HP appears to be taking things a bit slower in Europe due to more restrictive labour laws.

Wage cuts in Europe will initially affect "leaders at this stage", which means "HP manager 2 and up and EDS pay-banded staff". In a memo to EMEA staff, the firm said: "We will be speaking to those leaders as soon as possible to ask them individually for their consent and support for this difficult measure to come into effect on May 1, 2009."

We asked HP what the salary cuts meant for EDS employees following HP's buyout of the services firm last year. But it declined to provide any details.

The company will make further cost savings by putting a ceiling on some US employee benefits. The company will also scale back its matching 401 (k) pension contributions.

Also staff can no longer buy HP shares at a discount.

“In an environment like this, there’s no margin for error and no tolerance for inaction,” Hurd said. “My goal is to keep the muscle of this organisation intact, but we do have to do something because the numbers just don’t add up.”

But HP employees have been left spitting feathers over the latest move. This followed a difficult year at the firm where sweeping job cuts were made in a swingeing cost-saving exercise overseen by Hurd. In September 2008 he announced that 24,700 jobs were to be axed.

One worker told El Reg that staff were simply "thrilled at yet another kicking".

The Palo Alto, California-based company, which is the world's largest computer maker, reported a 13 per cent drop in its Q1 profit yesterday. ®

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