IBM cuts salaries of those eligible for overtime pay

Internal documents show many employees will lose money.

BOSTON (AP) — Even as IBM Corp. reports record profits, thousands of its U.S. employees are staring at pay cuts.

It’s the result of IBM’s response to a lawsuit in which the company was accused of illegally withholding overtime pay from some technical employees. IBM settled the case for $65 million in 2006 and has now decided that it needs to reclassify 7,600 technical-support workers as eligible for overtime.

But their underlying salary — the base pay they earn for their first 40 hours of work each week — will be cut 15 percent to compensate.

IBM spokesman Fred McNeese said the move would not save the company any money, because the affected employees generally should find that overtime pay makes up for the salary cut.

However, internal documents obtained by The Associated Press indicate that many workers will lose money.

These documents, prepared for managers who have had to break the news to their underlings, say that one-third of the affected workers — more than 2,500 people — generally do not work enough hours to make up for the 15 percent cut in base pay. IBM is offering a one-time “transition payment” to reimburse affected workers for the losses they suffer in the first three months.

One slide presentation says managers should try to spread assignments around so that more employees work enough to pass the threshold — five hours of overtime per week — at which their new time-and-a-half pay would make up for the reduction in base salary. But the document also acknowledges that “hot skills and customer commitments may limit [the] opportunity to redistribute overtime.”

IBM’s McNeese would not comment on the documents’ specific points. He said IBM had been paying these technical-support people at “market rates,” and to grant them overtime without a corresponding reduction in base pay would make them too expensive.

It is clear, however, that many employees are furious.

They worry that opportunities to work more than 40 hours per week — the point at which federal law requires overtime pay for eligible workers — will be reduced now that IBM has an incentive to trim employees’ time on the clock.

One 20-year IBM veteran who usually works 50 to 52 hours a week — enough to come out ahead now that she can get paid overtime — expects to see her hours reduced.

“Anybody who’s been in IBM knows that when they look to cut costs, that’s where they’re going to cut it,” said the employee, who spoke to the AP on condition of anonymity because she fears reprisals from the company.