IBM Offers Workers Training and Pay Cuts

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An IBM booth at a technology trade fair earlier this year. IBM regards the 10 percent salary cuts as a form of “co-investment” with the cost shared by workers and the company. Credit Nigel Treblin/Getty Images

IBM is cutting the pay of some employees in its services business by 10 percent for six months while they spend up to one day a week in training programs.

The move is unusual, according to work-force experts, but could become a trend in retraining programs as both corporations and workers struggle to stay competitive in a fast-changing economy. Some disgruntled IBM employees say the step is a cost-cutting tactic disguised as a training program. IBM says the program is limited to a small number of employees and is meant to avoid laying them off.

Last Friday, some workers in the company’s outsourcing business received emails informing them of the program. It stated that “a recent assessment” had identified workers who “have not kept pace with acquiring the skills and expertise needed to address changing client needs, technology and market requirements.” The email then added, “You have been identified as one of these employees,” according to a copy sent to The New York Times by an IBM worker.

The training is intended to take about a day a week, up to a total of 23 days. During that time, the email stated, “you will receive 90 percent of your current base salary.”

Employees receiving the offer are given little choice, other than to look elsewhere in the company “for opportunities for which your skills may be a better match.”

The IBM program was reported on Monday by Computerworld.

A spokeswoman for IBM, Trink Guarino, emphasized that the salary cut-and-retraining program was by no means standard practice across the company. A few hundred people in the technology services outsourcing business in the United States, she said, were affected. “This involves a very small number of people,” Ms. Guarino said, “and we’re working to preserve their jobs.”

The technology marketplace is shifting quickly, Ms. Guarino noted, as corporate customers move to adopt cloud and mobile computing, and advanced data analysis. The training programs will focus on those areas, she said.

The workers are in the IBM business unit that manages technology operations for other companies, in long-term outsourcing contracts that typically extend for five or more years. The IBM workers log billable hours, and if they spend a day a week on training, that amounts to 20 percent fewer billable hours. IBM regards the 10 percent salary cuts as a form of “co-investment” with the cost shared by workers and the company.

Some IBM workers don’t see it that way. One person who has worked for IBM for more than 20 years said that the skills assessment referred to in the email was not tailored to individuals. All the workers in his group, he said, were being assigned the same training program. He noted that the Indian workers who were part of the same team doing similar work for the same client were not involved.

“It seems like a cost-cutting exercise that is being presented as a training program,” said the IBM worker, who asked not to be identified because he feared consequences for criticizing the company.

A crucial issue, according to Peter Cappelli, a professor at the Wharton School of Business at the University of Pennsylvania, is the nature of the training in the IBM program. “If the skills they are learning are useful outside of IBM, it may be a pretty good deal for the workers,” he said. “If not, it just looks like cost cutting.”

Mr. Cappelli, director of Wharton’s Center for Human Resources, said that the concept of co-investing, with the costs shared by workers and companies, is “where we are going to end up going in retraining.” Already, employees and companies routinely split the tuition costs for workers who choose to take college courses to improve their skills.

However, he added, the tuition programs are different from the IBM initiative in that they are voluntary, with both worker and company choosing to make contributions.

“This one seems rougher,” Mr. Cappelli said, “because the company is forcing you to take a pay cut.”