ArcelorMittal Temirtau cuts wages by 25%31 july 2015, 17:32
ArcelorMittal Temirtau, a steel giant in Kazakhstan, is reducing wages of its employees by 25 percent starting from August 1, a Tengrinews correspondent reports. According to the company, the decision was taken due to "unprecedented market conditions."
ArcelorMittal is among world leaders in production of steel and occupies a leading position on the main steel markets around the world, including the industries like car-making, construction, household appliances and packaging. The company also has large reserves of raw materials and an efficient distribution system. The company employs more than 200,000 people and has operations in 60 countries.
The decision to cut wages of its employees in Temirtau was announced to the Kazakh government, trade unions and employees on July 28. Company representatives personally met with members of the government of Kazakhstan to explain the reasons behind the reduction of salaries.
"I hate to make such statements. But it is important for all our stakeholders and especially for our loyal and valuable employees to know the following. First of all, reducing costs is an extremely necessary measure that we have to reserve to if we want the company to have a stable future. Secondly, we believe, that this sacrifice is preferable to a large number of job cuts," said the company's CEO Vijay Mahadevan.
He added that he understood how hard it would be for the staff to understand the cuts. "I wrote to them personally to explain why it was necessary, and we are now in the process of negotiations and meetings. During these meetings, we want to make sure that every employee fully understood the reasons behind such action, and had an opportunity to ask questions," Mahadevan said.
The company explained that there had been a significant increase in imports to Kazakhstan, mostly from Russia. And the Russian imports were highly competitive due to the devaluation of the ruble that made Russian goods cheaper then their Kazakh competitors.
"In 2014, imports from Russia totaled 1.3 million tons, based on the statistics for the five months of 2015 (0.8 million tons), we assume that this figure could rise to 1.9 million tons in 2015. 3.7 million tons of steel was produced in Kazakhstan in 2014, this makes the impact of the imports on the market quite obvious," the company said. It also sited low demand and high transport and logistics costs.
"The largest share of the production costs is the wages fund. The money that we save by introducing the wages cuts will be invested into development of our business and improvement of competitiveness of the company," Mahadevan said.
But the company needs more than just its own decision to cut wages. The Ministry of Health and Social Development of Kazakhstan published a press release stating that ArcelorMittal Temirtau could not reduce the salaries of its employees without the consent of the trade unions.
In accordance with Article 126 of the Labor Code of Kazakhstan, the system of payment and motivation of employees is determined by a collective agreement, employment contract and (or) acts of the employer. The labor contract between the employer and the employee must include the amount and other terms of remuneration (Art. 28 of the Code). Terms and collective labor agreements cannot be modified unilaterally (Clause 3 of Article 10 of the Code).
The Ministry of Health and Social Development of tKazakhstan promised to continue monitoring the situation at ArcelorMittal Temirtau and take all necessary measures to prevent violations of labor rights of the company's employees.
By Dinara Urazova, editing by Tatyana Kuzmina