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Cost-cutting Eastman Kodak Co. in recent years has done away with everything from the corporate aircraft and its Olympics sponsorship to health-care benefits for retirees.
Next up: how much vacation workers can carry over, along with big changes to its pension plan.
The company unveiled a variety of pay and benefit changes to employees on Wednesday: a major restructuring of how Kodak will calculate pension benefits; lowering the cap on carried-over vacation time from four weeks to two; and a salary freeze for most executives this year.
"To make the company more competitive and aligned with the market, we must further simplify processes and manage our cost structure," CEO Jeff Clarke said in an internal employee memo.
The pension change does not affect retirees, only current employees, and is scheduled to go into effect Jan. 1. Currently, the Kodak Retirement Income Plan (KRIP) pays retirees based on either on a formula of how long they worked and their average annual pay, or on a set cash benefit that doesn't increase or decrease in value the way a 401(k) might, depending on how the investments supporting it do.
Effective Jan. 1, Kodak will go to just a cash balance pension, though the company will sweeten the formula � 7 percent of a worker's monthly compensation, instead of 4 percent. Kodak also is eliminating its matching contribution under the company Employees' Savings and Investment Plan (SIP), its 401(k).
The company estimates those KRIP and SIP changes will save the company $12 million in expenses in 2015, plus reduce its projected KRIP obligation by $55 million.
Kodak also said it would undertake a salary review for executives, with the expectation most would not receive a raise this year.
"We intend to be very selective on executive salaries this year, but there will be a limited program," spokeswoman Hilary Condit said. "Managers will have discretion to nominate those employees who are the highest performers in the most critical roles. Priority will also be given to those who are also paid below the market for the role."
Condit said the company had not yet determined how many executives would be affected by the move.
While salaries for most bosses won't move, bonuses are not part of that. However, the company said it also is restructuring its Global Variable Pay program to tie it more closely to certain business milestones.
"We are bringing benefits into alignment with the market," Condit said. "Accelerating Kodak's long-term growth and sustainable profitability is the driving force behind all of these changes."
Here's the full text of Clarke's memo:
The Executive Council recently held in-depth discussions on our strategic direction with a focus on identifying actions to accelerate the company's long-term growth, sustainable profitability and success. Kodak is in many important ways a new company � smaller, more tightly focused and more technology-driven. We are benchmarking many dimensions of our business and making changes as a result of that work.
Our overarching imperative is to invest in the continued growth of our strategic offerings. We must also upgrade our email, CRM and other IT systems. These business tools have been underfunded in recent years and are critically needed to effectively do our jobs and best serve our customers. We also need to build a pipeline of talent for the future, while renewing our focus on leadership development and employee engagement.
To make the company more competitive and aligned with the market, we must further simplify processes and manage our cost structure. We will also continue to evaluate our market competitiveness in compensation and benefits globally to ensure that we balance the ability to attract and retain talent with affordability.
Today, we are announcing several actions the Executive Council agreed are necessary changes:
- Moving from the current pension plan formulas and 401(k) match for U.S. employees to a single pension benefit formula, effective January 1 of 2015. With this change, our pension benefit will be competitive with companies in our industry. Employee pensions are unaffected through 2014.
- A reduction in U.S. vacation carryover from four to two weeks, implemented by end of 2015.
- A limited salary review for executives, based on both performance and gap-to-market, which will result in most executives not receiving an increase in 2014. Non-executive salary reviews are unaffected.
- A new structure for the Global Variable Pay program in the U.S., Canada and Israel to more closely tie rewards to company and business performance. The Wage Dividend program is unaffected.
We will provide further details on these changes to employees affected by them, starting with a communication on the benefits and compensation changes to U.S. employees later today.
I know that you have all been through many actions in recent years. However, continuing to move to market-competitive benefits and compensation is necessary to ensure our company's success into the future.