HP Asks Its Employees to Take Pay or Vacation Cut

Jun 29 2001

Hewlett-Packard said on Friday it was asking employees, including chief executive Carly Fiorina, to either take a pay cut or use up accrued vacation days, as part of cost cutting efforts to help the computer and printer maker contend with a slowdown.

"It's a 10 percent pay cut, or eight paid vacation days," said Hewlett spokesman Dave Berman. He said that built-up vacation days become a financial liability for the company.

The program is voluntary, and employees can elect to take a pay cut lower than 10 percent or to surrender fewer than eight vacation days, he said.

"We've had a tradition of employees pitching in and doing what they can in difficult economic times," said Berman, about the voluntary nature of the cost cutting plan.

The company declined to specify the amount of cost savings it hopes to achieve.

Berman said that executives, perhaps including Fiorina, would also have to turn in their company cars.

"Some senior executives get use of a car," he said. "Now the car policy is that it is only going to be for the sales force."

Other cost-cutting measures include tighter cell phone and travel policies, he said.

"These are the short-term efforts that we are taking, we have some long-term strategies, as well," said Berman. "These are aimed at making our third quarter consensus estimates, although obviously these efforts are going to go through the fourth quarter as well."

H-P, which is undergoing a large-scale restructuring, has already lowered its third-quarter earnings guidance twice during the period. The latest earnings per share consensus estimate for the quarter ending in October is 30 cents, according to Thomson Financial/First Call.

Fiorina has already made some sacrifices in light of the tough economic situation and its effect on technology spending and Hewlett's financial results.

"For the second half of 2000, she was entitled to a $625,000 bonus, and because the company did not make its internal targets, she did not take the bonus," said Berman. "She would have been entitled to take it regardless of performance."