FleetBoston Financial Corp. has eliminated merit pay raises this year for employees earning over $50,000 and has restructured its employee 401(k) plan to absorb losses suffered last year.
In January, the seventh-largest U.S. bank reported a fourth-quarter loss of $507 million as the company wrote off loans in Argentina and investments in technology companies.
The pay raise cutbacks and changes to the 401(k) are part of the company’s broader plan to cut expenses by $800 million by the first quarter. Late last year, FleetBoston announced plans to eliminate 700 jobs throughout the corporation.
Managers throughout the company started notifying employees last month that merit pay increases will not go to employees making over $50,000 annually. Company officials said 75 percent of its employees would not be impacted by the measure.
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On average, the merit pay increases are three percent.
Also, the company will adjust its Savings Plus 401(k) plan by no longer paying out its contribution on a monthly basis. Instead, the pay out will take place annually.
Along with saving cash, the change to the retirement plan is a way of keeping employees with the company longer.
“While that is a cost-saving initiative, we also see this as a retention tool,” said Kathleen Searle, a FleetBoston spokeswoman.
A memo from the company stated, “We believe that each of these measures will enable us to leverage our financial resources, maintain our broad spectrum of employee programs, and ultimately minimize job loss…Improved results from Fleet means more opportunity for (employees).”
In Rhode Island, it’s still unknown how Fleet’s other cost-cutting measure – layoffs – will be felt.
Searle said it’s unlikely that Fleet’s Rhode Island operations will experience a “large amount of layoffs.”
