Members of the executive board will see their salaries reduced by 50 percent, and cash compensation for non-executive directors will also be reduced by 50 percent.
As companies revise their financial outlooks for the coming year and cut costs, many are turning to temporary employee pay cuts as an alternative to layoffs. And the insurance industry is not immune: leading insurance and benefits provider Aon cut salaries for some 70 percent of its 50,000 workers by nearly 20 percent, effective May 1.
"Our value to clients stems fully from the collective capabilities of our colleagues," CEO Greg Case wrote in a 27 letter, in which he vowed that "no one at Aon is going to lose their job because of this COVID-19 outbreak."
And while no one will be forced to lose their jobs, the company is also making it hard for employees to pass on the salary reduction. As pointed out by Crain's Chicago Business, the actual amount of the pay cuts is 19.9 percent–just shy of the 20 percent that would trigger a "qualifying event" for an employee to quit and still receive severance under the company's corporate severance plan.
In addition, members of the executive board will see their salaries reduced by 50 percent, and cash compensation for non-executive directors will also be reduced by 50 percent.
According to a bulletin published by Wells Fargo Securities, "This is the first employee pay reduction in the history of Aon. It will be interesting to see if other brokers follow suit; our assumption is they might."
U.S. employees will bear the brunt of salary reductions, as European employment laws require workers to agree to pay cuts before they can take effect. "Doing some sort of broad-based pay reduction programs are very difficult, and the impact oftentimes will fall most heavily and unfairly on the U.S. population," Aon competitor Marsh $ McLennan CEO Dan Glaser said.
Crain's also notes that, despite the company's pledge to retain its full workforce, cuts will be inevitable after Aon and Willis Towers Watson complete their merger, which is currently on track for the first half of next year.
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Emily Payne
Emily Payne is director, content analytics for ALM's Business & Finance Markets and former managing editor for BenefitsPRO. A Wisconsin native, she has spent the past decade writing and editing for various athletic and fitness publications. She holds an English degree and Business certificate from the University of Wisconsin.
