Wage freezes reflect harsh IT economy

31 Jan 2003

Reports today that chip maker Intel is to impose a pay freeze across almost all its 3,200 staff in Ireland is further indication that the sector may not be out of the woods just yet.

A spokesperson for the company told siliconrepublic.com the decision had been “rolled out to staff last week”. Intel says that due to the economic downturn, costs had to be controlled in order to allow the firm to continue to invest in research and development.

The spokesperson added that stock options and performance-related bonuses would remain in place for employees, however she acknowledged that staff had not been negotiated with on this occasion.

Industry experts are admitting that wage freezes in both large and small companies have been a feature in the sector over the past couple of years.

They maintain however that the development was not necessarily a bad omen for its future health.

Speaking to siliconrepublic.com former chair of the Irish Software Association (ISA) Billy Huggart said Intel was far from unusual in taking such a move, adding that he was aware of a number of companies large and small who had implemented similar freezes. However he declined to name them.

“In order to see their way out of massive downturns it should be imperative for companies that financial decisions should be taken to hold salary costs,” he said.

Huggart argued that decision to impose freezes was not at all surprising in a climate where companies were trying to re-establish themselves following the sudden downturn in 2001 and 2002, adding that it was going to take more time to recover.

Referring to recent research carried out by Irish Computer magazine he said that hardware sales were down by 11pc. “We haven’t seen the explosion in the device sector that was hoped for – PDAs and XDAs and the like which are using Intel technology.”

Asked whether he thought the decision would have an impact on Intel’s FAB 24 plant, which recently resumed construction, following a period of postponement due to a deterioration in market conditions, he said he doubted that it would, arguing that Intel had a very well worked out plan in relation to the plant.

However he acknowledged that a question mark now hung over whether or not there would be another FAB in the near future.

Huggart said he believed that the move was necessary insisting it was not a bad sign for the sector saying that the downturn would eventually come to an end, as Ireland’s high inflation rate is tackled.

Spokesman for the IDA Brendan Kenny, similarly believed the measure was a necessary corrective to the market.

In an interview with siliconrepublic.com he said that the IDA had referred to this situation in their end-of-year report, which confirmed that many companies – and not just in the ICT sector were negotiating with their staff on such moves in return for stock options and bonuses etc.

Brendan Butler of ICT Ireland and IBEC however said he didn’t believe that wage freezes were necessarily likely to continue across the sector in the coming year: “I wouldn’t have thought there would be more this year. The vast majority of retrenchment has already taken place.”

He added: “The critical point is that the vast majority of companies have tried to do this without letting people go. This type of company doesn’t take these decision unless it’s absolutely necessary.”

If market conditions continue to remain flat however Irish employees in the ICT sector can expect to be working under such belt-tightening conditions for some time.

By Suzanne Byrne