Employees of Air India are likely to undergo another round of pay cuts, after their salaries were trimmed by 25% in July 2012.
The airline, which has been struggling with mounting losses, has decided to do away with performance-linked incentives (PLI), which account for a significant portion of employees’ remuneration. The company’s management hopes to implement the decision to withdraw such incentives, currently given to all of its 13,500 employees, by the end of the calendar year, according to a senior Air India executive who declined to be identified.
The official said that since Air India wasn’t making any profits, it made no sense to continue doling out performance-linked rewards to employees. At public sector undertakings like Air India, performance-linked incentives are linked to the profits made by the company.
“We will consider restoring performance-linked incentives once we start making profits again,” the official said.
The notification of the new pay structure, which excludes these incentives, has been issued and the new structure has already been implemented for the so-called general category employees, which include technicians, workmen and others.
The airline’s management will be speaking to the multiple employee unions at Air India to take them into confidence regarding the merits of the step being taken, and is prepared to face resistance to the decision from these representative bodies, the Air India official said. Air India has at least 10 employees’ unions.
Performance-linked incentives can constitute up to 40% of an employee’s overall remuneration at Air India, and vary from person to person depending on factors like seniority and responsibilities, two Air India employees told FE on the condition of anonymity.
“The takehome salaries of employees will be affected due to the management’s decision,” one of the airline’s employees said.
Salaries paid to pilots and cabin crew constitute 60-70% of Air India’s total employee costs. The average salary that a co-pilot or a first officer earns is around Rs 1.5-3.5 lakh per month while a captain or a commander earns around Rs 5.6-7 lakh per month, one of the airline officials cited earlier said.
The senior Air India official quoted earlier said that the take-home salaries of employees could drop by 5-10%, depending on their position s and ranks, after these incentives were withdrawn.
A second senior Air India executive said that the wage bill of the airline, estimated to be at Rs 3,100 crore in 2013-14, will reduce significantly after these performance-linked incentives are removed. But the reduction in payroll costs will not be visible in 2014-15 since the company will have to account for employees’ entitlements arising from settlements on account of factors like voluntary retirement.
Air India had a debt of over Rs 44,000 crore as on March 31 and it hasn’t posted an annual profit since its merger with Indian Airlines in 2007. The airline is expected to post an operating loss of Rs 1,235 crore in FY15, down from the Rs 2,012-crore loss it posted in fy14. A third Air India executive had told FE earlier that the net loss of the airline is estimated to narrow down to Rs 4,346 crore
by the end of fy15 from Rs 5,388 crore in FY14.
fe Bureau | The Financial Express