Firms react to the virus with pay cuts

Amid a nationwide lockdown to slow the spread of covid-19, companies are reworking cost structures to survive, as remote work and lower discretionary spending have become the new normal.

Companies in the worst-hit sectors such as aviation and hospitality have announced immediate pay cuts. Indigo, India’s most profitable airline, was the first to announce a 25% cut in senior staff pay. Rival airlines SpiceJet and GoAir too have announced similar pay cuts. GoAir has also retrenched its entire workforce of expat pilots, who are considered expensive. It has introduced leave without pay and up to 50% pay cut for its top leadership.

On Thursday, SoftBankfunded Oyo reduced salaries for senior and top-level executives. Founder and CEO Ritesh Agarwal decided to forgo his entire FY21 salary while the company’s executive leadership took a voluntary pay cut beginning at 25%.

Many companies are also revisiting organisational structures to manage costs. Headhunters who spoke to Mint requesting anonymity estimated that C-suite hiring is already down by 50%, worse than during the economic slowdown in 2008-09. Many companies are trying to fill critical roles internally even if the person does not tick all the boxes.

E-commerce and online delivery companies have struggled to keep operating, and some have tapped technology solutions to keep going. Ashish Jhina, co-founder of Jumbotail, an online wholesale marketplace for food and grocery products, said the company is working to reduce delivery touch points by artificial intelligence-driven delivery promise, and route optimisation. These have resulted in 50-60% increase in productivity within the last week itself, he said. “We are working with non-essential services companies to utilise their workforce to ramp up delivery capacity,” Jhina said.

Some companies have stopped or delayed payments to suppliers to conserve cash, by invoking force majeure clauses. One of them is commercial vehicle maker Volvo Eicher Commercial Vehicles, which has decided to temporarily delay payments to some suppliers.

SOME COMPANIES HAVE STOPPED OR DELAYED PAYMENTS TO SAVE CASH BY INVOKING FORCE MAJEURE