Companies are trying to survive by slashing pay and reducing employees
Ahmad (not his real name), a middle-aged corporate executive in Dhaka, was contributing to aid initiatives at the beginning of April this year. He along with some of his friends was helping daily wage earners who had become jobless because of the nationwide shutdown put in force to control the Covid-19 outbreak.
Within three weeks, the father of two began to fear himself to be on the flip-side as he saw the prospect of job loss after his company decided to cut costs amid declining revenue.
Meanwhile, Adnan (not real name) -- a young man with a business administration degree from an expensive private university -- joined a new luxurious hotel six months ago. Early last month, he was asked not to come to work until further notice.
The Covid-19 pandemic has exposed lakhs of private sector employees like Ahmad and Adnan in the country to sudden job losses, salary cuts, layoffs and forced unpaid leaves.
Private companies -- be it garments, consumer goods, tourism, building materials, media and many more sectors -- have been announcing pay and job cuts in response to sliding revenues in this dismal economy.
These people who live on their monthly salaries are at risk of being cornered further as their expenses for house rents, kids' education, and food have not gone down at all.
RFL of Pran-RFL Group which is the leader in consumer durable plastic products has instructed its team leaders to list half of their 40,000 employees. Many of them will end up with no jobs.
According to RFL officials, they have got their salaries for April but they are in fear of job cuts in May as the sales of their company have gone down drastically.
Meanwhile, a business group that has diversified its business has decided to cut jobs and pay by 30 percent from its garment backward linkage industries.
A financial daily that has a good pay track record has announced a 20 percent pay cut for April, but it has promised to pay back the amount once normalcy returns. Employees of the media outlet can breathe a sigh of relief as they would be paid the Eid festival bonus.
"Owners are cutting payments as their revenue has declined. But how will I meet my expenditures?" said Aminul Islam Shohag, a mid-level executive of an export-oriented packaging factory.
"Will my landlord take less house rent or will the school authorities waive fees for my two kids?" he wondered.
Farhad Hossain who works in a brokerage house in Dhaka Stock Exchange lives in anxiety as he is yet to get his salary for April. Like Farhad, many of over 5,000 employees working in around 250 brokerage houses did not get their April pay and they are not sure about May as well.
The ongoing worldwide onslaught of the pandemic has also badly impacted all business sectors in Bangladesh. The private sector is trying to offset the revenue losses by cutting costs, and the employees are the first victims.
According to the Bangladesh Society for Human Resource Management, there are 70-80 lakh private sector executives and staff in Bangladesh.
Md Mashequr Rahman Khan, president of the organisation told The Business Standard, "We have 4,000 society members managing human resources across industries and we are being told about too many disturbing news."
He said a large number of employers are not paying their employees their due amount.
Khan, also a member of the Asia Pacific Federation of Human Resource Management, strongly opposes the popular idea to dump all the business uncertainties on human resources which should rather be treated as human capital.
The organisation has also written to the prime minister on this issue and requested her to take necessary actions.
The BSHRM has requested the government to include private sector executives and staffs' salaries into the scheme of concessional loans, alongside wages to workers, as the officials and beyond-production floor staff are dignified enough not to seek aid.
Citing that labour laws in all the neighbouring countries include company executives and staff as labours to protect their rights, the organisation recommends immediate circulars to amend Bangladesh Labour Act, 2006 and transform it into "Labour and Employment Act" later.
The decimations across industries
Several weeks' follow up of over a hundred companies has let The Business Standard learn that only a few corporate groups with strong balance sheets, or with a humanitarian approach are yet to consider cutting expenses by firing employees.
Shallow-book small or mid-size companies and startups with dependency on only cash flow, and companies with high debt burden or with business models too are exposed to the ongoing shocks and are worried that they cannot afford the same payroll.
In Bangladesh, companies with business models that might not allow them to recover soon even after the pandemic situation eases are more open to discuss payroll cuts. Ride sharing, tourism and hospitality are some such industries. Meanwhile employees at private hospitals and educational institutions are already feeling the pinch from the pandemic as they have been informed of pay cuts already.
A large business conglomerate having operations in services, media, engineering, real estate, and beverages industries is paying the full salary to its factory workers for April, but has decided on up to 50 percent pay cut for factory managers and professionals like engineers and accountants. Executives at the head office of the company are yet to receive any such notice but they fear they are next.
Besides, a four-decade-old group present in the automobile and real estate market has already decided for a progressive 10 to 50 percent pay cut across its companies to save 20 percent of salary expenses. The management also hints on firing employees.
On the other hand, a comparatively new real estate giant with a high debt burden is working on its plans for a 50 percent payroll cut – likely through a combination of both pay and job cuts, according to insiders.
A number of small and mid-size companies across industries are already in mutual agreement with employees for pay cuts, ranging from 10 to 50 percent, for April. Some are sending a portion of their teams on leave without pay.
Sources across industries say that temporary workers under master roll have already been eliminated in April, while a large number of permanent workers are being laid off with partial payments, in some cases delayed or even no pay.
It now seems it's now the executives' turn to go jobless, most likely silently, they hint.
RFL Managing Director RN Paul who sent the job cut announcement email in early-April, however said on Saturday, "The email was a miscommunication and we are not going to fire anyone during the crisis.''
The group would rather reorganise teams for better output in the disruptive business environment, he said.
Paul said the conglomerate would fill gaps in any of its businesses through better focusing on emerging opportunities home and abroad.
Meanwhile, Shahid Hamid, executive director of Dhaka Regency hotel, said, "Although we have not fired any employees, we are considering partial salary. Bonuses for the upcoming Eid will not be paid either."
Whom to save first?
A finance manager of a big company said, "It is a dilemma whether to save the company or the human resources in the first place."
"It will take up to the second or third week of May for reality to hit as companies need to decide on Eid bonuses followed by the payment of April's salary," he said.
One month of shutdown means a loss of over eight percent of annual revenue, and companies are trying to offset that by not paying Eid bonuses. Paying the two Eid bonuses cost 20-25 percent of the entire annual payroll expenses, he added.
A Bangladeshi chartered financial analyst working for a foreign investment group said no one knows the exact depth and extent of the pandemic and its economic effect. Hence, his headquarter suggested to anticipate a slowdown over the next 12-18 months.
"Paying employees from reserve is a noble idea only if it is for a certain time bearable by the company. But when the cycle of negative cash flow is really unknown, the approach may reduce a company's future capability to pay salaries and wages," he said.
Companies in the developed world, during their economic bust times, are experienced with such cost cutting measures for survival. But this is a new experience for Bangladeshi business groups when almost all their businesses are going down simultaneously.
"Prudent management will let neither the company nor its human resources go broke. The two must find a win-win solution," concluded the investment expert.