‘Deficient’ IBM Workers Get 10% Pay Cut, Re-Education

IBM has introduced a controversial program under which employees deemed lacking in technical skills needed for the cloud era must enter an unpaid training program that results in a 10 percent salary reduction. Selected workers must devote one day per week to the effort.

Big Blue spokesperson Trink Guarino said the program applies to “a small number” of workers in the company’s Global Technology Services unit, which manages IT infrastructures for some of the world’s biggest companies as well as key federal and state agencies.

The unit’s pre-tax income surged 22 percent in the most recent quarter.

Guarino said IBM wants workers selected for the six-month program to brush up on the skills needed for client engagements that involve cloud computing, mobile systems, and social media and analytics technologies -- areas CEO Ginny Rometty has previously identified as key markets for growth-challenged IBM.

“We would rather retrain them than hire new employees,” said Guarino. She declined to specify the number of affected workers.

Employees selected for the program were notified in a Sept. 12 confidential email, a copy of which has been obtained by the International Business Times.

“While you spend part of your work week on learning and development activities, you will receive 90 percent of your current base salary,” the memo states in part. Workers’ 401(K) contributions and other benefits are also reduced during the training period, the memo indicated.

Labor attorneys interviewed by IBT said it was the first time they had heard of such a program, and suggested it might violate the Fair Labor Standards Act. “That’s so weird, and it brings up all kinds of problems,” said New York City-based attorney Robert Ottinger. IBM “can force them to do training programs all day long, but what I’ve never heard of is that they’re going to cut their pay for that time,” said Ottinger.

Jahan Sagafi, of Outten & Golden, has previously represented IBM employees in civil suits against the company. “I’ve never heard of this before,” said Sagafi, who is based in tech hub San Francisco. “It sounds like a creative way to extract more value from employees.”

IBM workers said the program unfairly asks them to invest their own time developing skills that will benefit Big Blue.

“I have spent the whole of 2014 improving my skills and my manager has reviewed and approved my ‘skills update’. I have received recognition this year for sharing my expertise and offered to be a mentor when asked,” said an IBM worker who was selected for the program, in an anonymous post to a forum maintained by Alliance@IBM.

Alliance@IBM, an affiliate of Communications Workers of America, Local 1701, is encouraging IBM employees to unionize. Representatives for the organization did not immediately respond to inquiries.

Some IBMers said they suspect the program is simply a means to reduce expenses. One worker, posting on the Alliance forum, called the program “just another cost-reduction initiative.”

IBM is indeed under pressure to control costs as it struggles to grow revenues, which have been flat for the past several quarters. Continuing a precedent set by predecessor Sam Palmisano, Rometty has set specific earnings targets.

She has pledged to deliver earnings per share of $20 next year under an initiative called Roadmap 2015. EPS for 2013 was $14.94. The company stated in July that it is on track to deliver EPS of $18.00 for 2014.