Salary cuts and retrenchments at South African tech companies – What employees say

The COVID-19 pandemic and extended lockdown have devastated many sectors of the South African economy, including tourism, restaurants, and the entertainment industry.

The National Treasury’s latest estimates suggest South Africa will lose between 690,000 and 1.8 million jobs as a result of the COVID-19 lockdown.

The Reserve Bank also expects a big economic fallout due to the lockdown, with a GDP contraction of 7% – the worst since the Great Depression.

While the impact of COVID-19 on IT and telecoms companies is not as severe as many other industries, these industries are still faced with big challenges because of the downturn in the economy.

ICT companies which have a lot of exposure to the travel, tourism, and restaurant industries, for example, have to deal with a significant loss in revenue.

One of these companies is Adapt IT, which said the negative impact of the lockdown on its clients in the hospitality sector has resulted in 20% of its employees being unable to work or perform their regular duties.

The poor forecast of the hospitality sector has forced Adapt IT to consider staff cuts, and it is currently in a consultation process with 4% of its permanent staff who may be affected.

Altron COO Andrew Holden told MyBroadband they have had to effect temporary layoffs due to the inability of some customers to pay for services as their businesses had been affected by the lockdown.

“Where possible, Altron will seek alternative opportunities for affected employees within the group. Retrenchments are a last resort, and will be limited as far as possible,” said Holden.

Many other large tech companies like Altron, Dimension Data, Blue Label, and Alviva have also indicated that staff cuts may be necessary in the event of a prolonged economic downturn.

Salary cuts

Many South African IT companies had to implement salary cuts to mitigate the financial impact of the lockdown.

Salary cuts in the IT industry were necessary for two main reasons:

  • Many clients stopped paying because of the impact of the lockdown on their businesses.
  • Employees could not work because their clients had to close their businesses during lockdown.

In April, EOH CEO Stephen Van Coller announced that the company’s executive committee would take a salary reduction of 25%, with other staff taking a 20% pay cut.

This was needed because of the anticipated drop in payments from clients and future uncertainty on the full impact of COVID-19 on the economy and the company.

Cell C also implemented salary cuts and used the COVID-19 TERS Relief Funds to cover the shortfalls for those employees to the extent provided by the UIF.

Alviva told MyBroadband there were no mass pay cuts at the company, but that it had to implement salary reductions in a few isolated cases.

Altron followed a different approach to ensure the sustainability of the company. Instead of cutting salaries, it reversed all salary increases granted as of 1 March.

Good news for the telecoms industry is that very few of the large mobile operators and ISPs had to implement salary cuts during the lockdown.

Vodacom, MTN, Telkom, Liquid Telecom, Rain, Afrihost, Cool Ideas, and Cybersmart said they have not implemented any salary cuts during the lockdown.

The outlook for the South African ICT industry

While many large IT and telecoms companies were able to prevent retrenchments, they warned that the full impact of COVID-19 may result in staff cuts in future.

Alviva said the full impact of the COVID-19 pandemic on the economy and the company will inform their decision regarding future staff cuts.

Blue Label echoed this view. “Should the lockdown persist indefinitely, and economic conditions continue to adversely impact ourselves and our customers, hard decisions regarding retrenchments will have to be made,” the company said.

Dimension Data told MyBroadband should the need arise to reduce its workforce to ensure sound and responsible fiscal management, it would be done only after exhausting all possible alternatives.

“We will always take a long-term view of the market opportunities, trends, economic outlook, and investment and spend forecasts and put them in the context of our strategy and vision before making any decisions,” Dimension Data said.

Telkom said while it has not cut any salaries at this stage, it is still studying the impact of the virus and the lockdown on the business.

What employees say

To find out how COVID-19 impacted IT and telecoms employees, MyBroadband launched a Lockdown Survey in June.

This survey was completed by 7,603 South African IT executives and IT professionals across South Africa.

A few of the prominent findings of the lockdown survey include:

  • 55% of people are in a worse financial position than before the lockdown, while only 7% are in a better position.
  • The majority of employees received good or excellent support from their companies during lockdown.
  • 34% of employees are concerned they will lose their job as a result of the COVID-19 pandemic.
  • The majority of employees are positive about the financial future of their company.

While this result overview gives insight into the general feeling of ICT employees, it differs significantly from company to company.

To gain company-specific insight, employees were asked various questions about their company, including:

  • Support Approval Rating – How would you describe the support you received from your company during the lockdown?
  • Financial Future Rating – How would you describe the financial future of your company?
  • Job Security – Are you concerned you will lose your job as a result of the COVID-19 pandemic?

Here are a few of the interesting findings from the lockdown survey about prominent IT and telecoms companies.

  • Vox, MultiChoice, and Vodacom employees are the least concerned about losing their jobs because of COVID-19.
  • Adapt IT employees are the most concerned about job security, with 60% of staff saying they are worried that they will lose their jobs.
  • Vox, MTN, Afrihost, and MultiChoice’s provided the best employee support during the lockdown.
  • Adapt IT, EOH, and Telkom provided the worst employee support to their employees during the lockdown.
  • Vox, Vodacom, and Liquid Telecom’s employees were the most positive about the future of their company.
  • EOH, Sasol, and Cell C’s employees had the biggest concern about the financial future of their companies.

The image below provides an overview of the lockdown survey results for prominent IT and telecoms companies in South Africa.

The Average Company Trust was calculated by using the average score of the support approval rating, financial future rating, and job security rating.

How employees rate their company’s lockdown support and financial future

The percentage of employees who are worried they will lose their job

Now read: Top South African tech companies – Salary cuts, retrenchments, and work-from-home policies

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Salary cuts and retrenchments at South African tech companies – What employees say