GM Is Reducing Employee Salaries But Promises To Pay Them Back Later

Photo: Jeff Kowalsky, Getty

General Motors just announced to employees that it will reduce their salaries as a way to weather the economic crisis that has resulted from the coronavirus pandemic. Here’s what we know so far.

A tipster informed us via email that GM just gave its employees the details of a wage reduction plan on an internal website. While we don’t have a lot of information, what we do know is that it appears that most salaried employees working from home are going to end up with a “20-per cent pay deferment,” while some employees who can’t work from home will simply have their salaries reduced by 25 per cent.

GM’s correspondence with its employees includes discussion about the roughly 6,500 U.S. employees who cannot work from home, and who will, therefore, take part in something called the “Salaried Downtime Paid Absence” policy described below:

Salaried Downtime Paid Absence (SDPA)

In the US, we have about approximately 6,500 salaried employees who cannot work from home and therefore we will utilise our Salaried Downtime Paid Absence policy. In the U.S., the majority of these employees are in salaried manufacturing or engineering roles. Other countries are evaluating the appropriate use of similar programs that comply with local laws.

In the US, these salaried employees will receive 75 per cent of their pay while on SDPA.

As for those not covered by the aforementioned Salaried Downtime Paid Absence situation, there’s going to be a 20 per cent pay deferment, with the cut being repaid in a lump sum late this year or in early 2021. From GM:

Salaried and Executive Pay Deferral

Additionally, starting April 1, most global salaried employees not impacted by the downtime plan are being asked to take a 20-per cent pay deferment, which will be re-paid in a lump sum, with interest, between the 4th quarter 2020 and no later than 1st quarter 2021.

Compensation statements will be made available. The process varies by country, and acknowledgement may be required.

Furthermore, as part of this shared sacrifice, our executives will see a total of 25 per cent reduction and 30 per cent for the Senior Leadership team. Even our Board of Directors will take a cut.

This comes at a time when GM and other automakers have shut down their plants to protect employee health and to slow the spread of the coronavirus, and during a time of economic uncertainty. Just earlier this week, we learned that Fiat Chrysler laid off roughly 2,000 contract employees as a result of the pandemic.

Here’s GM’s response to our request for statement:

Statement:

“GM’s business and its balance sheet was very strong before the COVID-19 outbreak and the steps we are taking now will help ensure that we can regain our momentum as quickly as possible after this crisis is over.”

Overview of GM Compensation Adjustments

  • Globally, all GM salaried employees will have 20 per cent of their cash compensation deferred beginning April 1

  • This deferment will be repaid in a lump sum no later than March 15, 2021.

  • As part of this shared sacrifice, executives will see a total of 25 per cent reduction and 30 per cent for the Senior Leadership team

  • GM’s Board of Directors will take a 20 per cent reduction in compensation

  • Healthcare benefits are not impacted.

  • At 2019CYE, GM had approximately 69,000 salaried employees (42 per cent of global workforce)

  • The immediate cash savings will be significant, but we are not providing a range

Salaried Downtime Paid Absence (SDPA)

  • About 6,500 salaried employees in the U.S. will participate in SPDA in lieu of the salaried deferral program. Other countries are evaluating the appropriate use of similar programs.

  • These salaried employees will receive 75 per cent of their pay while on SDPA. This reduced salary is intended to be in lieu of unemployment compensation benefits.

  • Most affected employees are in salaried Manufacturing or Engineering roles and are not able to work remotely.

We spoke with GM’s spokesperson, who provided a bit of background: “We need to preserve cash during the crisis because we have so little production around the world,” he said. “But we also want to keep the team together,” he continued, saying that doing so will allow GM to get things back up to speed quickly when this all ends.

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