- Tata Sons and its group companies are examining the prospect of cutting salaries of key managerial staff and senior management by around 15-20 percent.
To mitigate the impact of economic slowdown on company balance sheets, Tata Sons and its group companies are examining the prospect of cutting salaries of key managerial staff and senior management by around 15-20 percent. The decision was taken at the board meeting of Tata Sons on 5 June, two persons with direct knowledge of the matter said.
While Tata Sons took this decision as the holding company of Tata group companies, it will have to be ratified by individual company boards and respective committees said the first of the two people quoted above.
“The senior management of Tata Sons will take a pay cut of around 15-20 percent. But it has a strength of about 200 employees as a company so the impact is nominal. The group companies are where the cost-cutting measures are needed and it would be necessary for individual companies to pass this through their commissions and boards of remuneration. It is also likely to postpone appraisal periods and incentives for Tata Sons and company businesses. But, at this point, no job cuts were envisaged, “the second of the two people said.
Measures to cut costs will span all operations including marketing, human resources, and finance.
However, it had ruled out any immediate asset monetization strategy following the board meeting on 5 June due to the ongoing covid19 crisis.
“Tata Sons is in a strong financial position with adequate cash flows to support group businesses and new growth initiatives. Tata Sons does not seek to monetize its investments to raise capital,” N Chandrasekaran, Chairman, Tata Sons said in a statement on June 5.
In their results, listed Tata group companies have pointed out that they are resorting to cost-cutting steps, such as reducing wages for employees.
Tata Consultancy Services (TCS), in its annual report for FY20, said that managerial remuneration had decreased by 15% as a cost optimization measure. The annual remuneration of TCS CEO and MD Rajesh Gopinathan shrank 16.5% to ₹13.3 crores in 2019-20, compared with the previous fiscal, given the economic conditions impacted by the COVID-19 pandemic. Post its Q4 results, TCS also said that there will be no increments and a freeze on future hires, although they are honoring the 30,000 plus campus offers already made.
Tata Motors that announced massive losses for Q4 FY 20 / 99894 crores at the back of steep vehicle sales will have to resort to higher cost-cutting steps and steeper pay cuts of 25 percent, the first person listed earlier in the story said.
Although the company has not mentioned layoffs or job losses, after the cost of building automobiles, the employee cost is 11 percent. “By rigorously managing cost and investment spending to protect liquidity, the company will focus on conserve cash. The company called for a cost reduction plan of some 1,500 crores and a cash investment system of some 6,000 crores, “said Tata Motors in a Monday exchange filing.