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Collins Aerospace announced it will institute a temporary pay cut for salaried employees and furloughs for hourly employees worldwide, following a drop in commercial and business travel because of the coronavirus pandemic.
Salaried workers will see a 10 percent gross pay cut starting June 1 through the remainder of 2020, amounting to an approximate 6 percent decrease in their overall annual salary, according to a Collins Aerospace frequently-asked-questions document dated Sunday.
As part of the salary reduction, the company also has designated 15 holiday-adjacent days, between May 22 and Dec. 23, during which those employees should not work.
Furloughed hourly employees will continue to receive benefits but will not receive pay for hours not worked. Specific furlough schedules, including design and duration, will vary for employees across Collins Aerospace sites worldwide.
Specific impacts to hourly employees at Collins Aerospace's Iowa locations - in Cedar Rapids, Coralville, Decorah, Bellevue and Manchester - were not immediately available Tuesday.
'I recognize that this puts a burden on all of you, and your families, and increases the feelings of uncertainty we are all experiencing in this unprecedented time,” said Greg Hayes, chairman and CEO of Collins Aerospace's parent company, the newly formed Raytheon Technologies Corp., in a Tuesday letter to employees.
'However, these are temporary measures that we must take to responsibly manage the company through the business repercussions of the COVID-19 pandemic.”
The temporary pay cuts will extend to salaried employees at Raytheon Technologies Corp.'s corporate offices and aircraft engine manufacturing arm Pratt and Whitney. Hourly employees at Pratt and Whitney also will be furloughed.
Hayes said he also has volunteered to the company's board to reduce his pay by 20 percent through year's end.
His employment agreement stipulates he is to receive an annual base salary of $1.6 million, a target bonus opportunity of $3.2 million, annual equity awards with an aggregate grant date value targeted at $13 million or greater, and pre- and post-merger closing bonuses based on company performance.
In its FAQs, Collins Aerospace said - though its military business has remained strong during the pandemic - about 75 percent of its business is driven by commercial and business travel.
As a result of COVID-19, Hayes said in his letter, Raytheon Technologies Corp.'s commercial business partners 'have begun dramatically scaling back on their operations in order to preserve capital and protect the long-term needs of their businesses.”
Before the pay cuts and furloughs, Collins Aerospace took previous cost-saving measures that included deferring 2020 merit increases for executive and salaried employees, instituting a hiring freeze for non-essential positions, and restricting overtime and capital expenditures.
'Unfortunately, these measures are not enough to offset the significant decrease in customer demand,” the FAQs say. 'As a result, we made the difficult decision to implement a temporary reduction for salaried employees and furlough program for hourly employees. This global program will follow all local regulations and collective bargaining agreements in place.”
Collins Aerospace's changes will be implemented worldwide, extending to company President Steve Timm and other executives.
Some Collins Aerospace employees of designated military and government business segments will be exempt from the pay cuts and furloughs 'to ensure a seamless commitment” to their customers.
Those businesses are set to identify alternative cost-reduction measures.
Raytheon's Intelligence and Space and its Missiles and Defense businesses also will not be included in the temporary pay cuts or furloughs.
Hayes said those segments 'have a duty to stay fully operational to serve the critical needs of the U.S. Department of Defense and its allies.”
'The robust strength of these segments of our business will help shield the company overall as we manage through this complex business environment,” he said.
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