Estonian businessman : one possibility is to cut wages

Sandra Taimre, Toomas Hõbemägi

Estonia businessman Jüri Käo said at Äripäev roundtable that Estonian entrepreneurs should consider the possibility of cutting the employees wages during the tough times.

According to Käo, Estonian entrepreneurs do not use the possibility to decrease salaries. “It’s being done in the rest of the world, there are collective contracts, the employees are being explained the company’s development perspectives and the current situation. They show that the wages have to be cut as the alternative is even worse,” he explained. “It’s not a cool decision,” Käo added.

Hansabank analyst Maris Lauri said that the wage growth has slowed down already but when looking at the statistics it has to be taken into consideration that the number of employees is being reduced in the sector of cheap labor force and therefore the average salary will increase and on certain specialties the wage growth remains.

Äripäev CEO Igor Rõtov said that Estonian entrepreneurs are used to the situation where it is easy to generate the turnover and secondly it is difficult to say to employees in case of the fall in turnover that their salaries will be cut as much as the turnover declined. There is lack of dynamics, Rõtov added.

A large concrete element manufacturer Talot has both reduced workforce and cut wages between 20 and 30 pct. “The pay cut affected everybody,” said Filipp Morozov, an executive of Talot.

Toomas Tõnts who owns agribusiness trading firm Palu Talu Kaubandus said in comment that he already cut employee wages in May. “Some workers left and now I have only a construction worker who agreed to a pay cut.”

Businessmen say that there is space to cut wages since in the last four years Estonian average gross wages have increased 80 pct. Average wages in the second quarter of 2008 were EEK 13,306.

Tarmo Noop, CEO of beverage group A. Le Coq Tartu Õlletehas, said that he preferred freezing wages and laying off workers to a pay cut. “A pay cut inevitably affects the morale and what businessmen wants employees who are not motivated?” he asked.

Most participants in the roundtable agreed that the real redundancy wave would arrive in the autumn.