Capita CEO and CFO take 'voluntary' pay cut of 25% amid coronavirus outbreak
Exec raises spectre of other cost-cutting activities but doesn't yet mention redundancies
Capita's CEO, Jon Lewis, and his chief bean counter are taking a "voluntary" pay cut of 25 per cent for six months from 1 April in and among other "difficult decisions" the business says it will be forced to make during the COVID-19 pandemic.
Lewis kicked off the memo sent to his troops on 20 March – seen by us – by saying there are "many ways" in which they can help clients "particularly in government" to "navigate the challenges we all now face".
He said it is "crucial" that Capita people concentrate on "delivering vital services to millions of people" to help the corporation get through an "unprecedented period of uncertainty".
"Over the coming weeks it is likely we will have to make difficult decisions in order to ensure we remain resilient," the memo stated. "However, taking difficult short or medium-term decisions now will ultimately benefit the company in the long term. This is especially the case regarding our cost base."
It is "for this reason" that Lewis said he and CFO Patrick Butcher "have chosen to take a voluntary, 25 per cent reduction to our salary. We believe this is the right thing to do."
According to the 2019 annual report [PDF], Lewis was paid a base salary of £725,000, and Butcher was paid £430,000. In addition, Lewis was paid benefits of £28,828, a pension allowance of £36,250 and a bonus of £1.228m. Butcher also got £24,809 in benefits, £36,250 in pension contributions and £305,363 from a long-term incentive plan.
All members of Capita's board have also "agreed to a reduction by the same amount of the fees associated with their directorship". The chairman was paid £325,000 in base salary and £28 in benefits, while the rest of the board were each paid a base salary of between £64,000 and £75,000.
We asked Capita to comment on whether it plans to run any redundancy programmes as it tries to trim costs in the current climate. The company said it was "not going to be commenting on this occasion".
The UK government revealed on Friday that it will pay 80 per cent of wages of employees that are kept on by their employer, up to £2,500 per person per month, amid the pandemic. The subsidy will only apply to businesses that have already laid off people, providing they re-employ those people, albeit giving them a leave of absence. The plan is designed to minimise layoffs at this time.
It has been a tough couple of years for Capita and it is part way through its own "transformation". The company reported a 4 per cent fall in turnover for the year ended 31 December 2019. Operating profit was down 8 per cent to £400,000. Finance costs and tax credit meant Capita exited the year with a net loss of £54.1m. ®