Intel’s quiet downsizing
Job cuts in the technology sector have continued apace throughout January with thousands being axed at the likes of Google, Amazon, Meta, Microsoft, Salesforce, IBM, PayPal, HubSpot, NetApp and Workday.
According to website layoffs.fyi, 241 tech companies had axed 77,916 employees by 31 January 2023. It makes for depressing reading although it’s worth pointing out that, according to Gartner, 70% of CFOs intend to increase staff pay by 3-10% this year and another 15% or so plan to raise salaries by more than 10%.
Anyway, amid all the news about people losing their jobs, Intel seems to have moved on to the next stage in its strategy. After reporting a 32% fall in Q4 revenue, its fourth consecutive quarter of declining sales, the semiconductor giant estimated that sales for Q1 2023 would be down 40%. The company had already revealed it would make a “meaningful number” of job cuts in October last year.
Now, Intel seems ready to heap further pain on its employees by announcing cuts in base pay for all midlevel employees by 5% from 1 March. As The Oregonian reports, base salaries for vice presidents will be cut by 10%, senior vice presidents will face a 15% reduction and chief executive Pat Gelsinger will be hit by a 25% cut.
Staff on hourly rates and those below grade 6 will not be affected. Annual bonuses will remain for all but Intel is cutting other incentives. Merit raises have been suspended for all employees, along with quarterly profit-sharing bonuses and employee recognition programmes.
In a statement to The Oregonian, Intel said the changes were “designed to impact our executive population more significantly and will help support the investments and overall workforce needed to accelerate our transformation and achieve our long-term strategy”.
Leaving on the QT
While an argument can be made for reducing salaries to preserve jobs during times of economic difficulty, it may not be a winning one for some employees. As semiconductor analyst Dylan Patel noted on the SemiAnalyst website: “This was an incredibly dumb move, as employees will become ‘quiet quitters’ and lose morale.”
He argued that bonus cuts were “one thing, but base pay cuts sting. Intel, unfortunately, has to cut costs dramatically due to its immense amount of cash being burned, but they are doing it in the worst way”.
It was likely that high performers would “start to ‘phone it in’ while they look for their next job, as there is no incentive to keep working long nights and early mornings”.
It’s hard to argue that staff morale won’t be affected by the measures announced by Intel. A fairer solution would possibly be to have a commensurate reduction in working hours to reflect the cut in salaries. That way, employees would have seen a clear link between their pay cut and their work for the company.
As it is, a number of employees are expected to make the same contribution to their employer while receiving less in return. That means they are now placed in the position of going above and beyond just by going to work as normal every day. No wonder Patel is sceptical that they will work the long nights and early mornings they may have done in the past.
Intel told The Oregonian that it was “grateful to our employees for their commitment to Intel and patience during this time as we know these changes are not easy”. That commitment and patience may be stretched to breaking point for some.
As Patel noted, while the cuts will hurt employees, they are “dwarfed by their [Intel’s] quarterly dividend, of course, which we have been clamouring for them to cut for over a year”.
When the chips are down, the shareholders still get their payout.
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