Caterpillar to cut white-collar pay up to 50%, offer buyouts
WASHINGTON -- The company will slash executive compensation up to 50%, cut many employees' pay as much as 15% and offer voluntary buyouts to its 25,000 workers.
"We understand these decisions will disrupt the lives of many of our employees and their families," Caterpillar CEO Jim Owens said in a statement.
Kathie Lingle, executive director of the Alliance for Work-Life Progress at WorldatWork, says the strategy, while not without pain, helps workers, who hold on to vital health and other benefits as well as their jobs. Carrying workers on the payroll also helps employers, who would otherwise face the time and cost of training new employees when the economy revives.
"It's not common, but in each recession it seems to be picking up speed … as proactive employers figure out that it's very expensive to lay people off and then go back and hire them," Lingle says.
State and local governments are using the strategy. Pennsylvania Gov. Edward Rendell announced a wage freeze for more than 13,600 non-union employees, told state executives to return a cost-of-living increase and said he would begin wage talks with unionized workers. In Galveston, Texas, hard hit by Hurricane Ike, the city manager is asking employees to take a 3% pay cut.
"We are definitely suffering from Ike. Our residents are further suffering if they've lost jobs or are worried about losing jobs," says Alicia Cahill, Galveston city spokeswoman.
While lawmakers have chastised Wall Street firms for paying hefty bonuses in the midst of tanking markets and government bailouts, some prominent CEOs are cutting their pay.
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