Germany: Volkswagen reduces the ‘guaranteed salary’ it promised to 18,000 managers

On 13 May Volkswagen’s middle management (some 18,000 mangers) learned that the variable part of their salaries would be reduced in 2020, due to the collapse of the group’s revenues since the development of the coronavirus pandemic. At the same time, the German auto-manufacturer announced that after having restarted production at the end of April, it was going to slow down production again because of very low demand. This variable salary element is being phased out just one year after the introduction of a new system for calculating variable pay. In 2019, VW had introduced a three-year system that would see the portion linked to individual ‘performance’ removed and replaced with a portion indexed to the company’s results (earnings/stock price). The ‘company element’ now accounts for two-thirds of managers’ variable remuneration. Agreed in 2018 and introduced in 2019, managers had been set to receive at least 100% of the 2019 variable portion in 2020, then 90% and 80% in subsequent years. But given the very poor results expected for 2020, the new rule presented by the automotive group’s management has revised its guarantees downwards. For 2020, managers will receive a guaranteed variable portion equivalent to 90% of what they received in 2019. For 2021 and 2022, however, Volkswagen will no longer provide any guarantee on this variable part, which will therefore be entirely dependent on the company’s results. Volkswagen’s middle management can thus probably look forward to lower incomes over the years ahead.