ExxonMobil announced yesterday that they will no longer be matching U.S. employee’s contributions to their retirement savings plans. The suspension of these benefits will officially begin on October 1st, 2020. According to Reuters, ExxonMobil has now experienced, “its first back-to-back quarterly loss in 36 years because of the drop in demand during the novel coronavirus pandemic,” (Seba).
ExxonMobil currently has two savings plans available to employees, the first is the U.S. ExxonMobil Savings Plan (EMSP) and the second is the U.S. Supplement Savings Plan (SSP). According to a document which ExxonMobil sent to its employees, the company’s current policy for the EMSP is to match, “a 6% minimum employee contribution with 7% of the participant’s pay.” (“U.S. ExxonMobil Savings Plan Changes”). The SSP is a separate plan which, “provides the continuation of the company match amounts beyond certain IRS-prescribed dollar contribution figues,” (“U.S. ExxonMobil Savings Plan Changes”). Both of these match programs will be suspended indefinitely beginning on October 1st.
ExxonMobil is just one of 46,000 businesses which has decided to cut 401(k) contributions during the pandemic. According to a CNBC around 8% of employers have reduced or suspended benefits.
Predictably, this announcement has not been received well by ExxonMobil employees. Reuters reported that, “at Exxon’s Baytown, Texas, refinery and chemical plant, the United Steelworkers (USW) local union plans file a demand to negotiate over the change in the savings plan,” (Seba). According to that same article Unions in Beaumont, Texas, Baton Rouge, Louisiana, and Billings, Montana have not decided how they will proceed.
According to ExxonMobil this decision was an attempt to reduce cost, “in response to the current business environment” (“U.S. ExxonMobil Savings Plan Changes”). This announcement comes in the midst of a recession which has been especially difficult on the oil & gas industry. Late last month Forbes came out with an article claiming ExxonMobil experienced, “a first-quarter loss of $610 million, a 126% decrease from the same time period last year, after a plunge in the price of oil” (Gross). According to Reuters, Neil Chapman, ExxonMobil’s Senior Vice President, stated on Friday that the company would be cutting capital and operating expenses to protect their dividend.
According to International Business Times, “Exxon, America’s largest oil company, is reportedly eager to maintain its annual $15 billion annual dividend and must make cuts to preserve the payout,” (Ghosh). IBT also reported that ExxonMobil’s shares have plummeted by 35% and the company has borrowed 18 billion dollars in this year alone. In April ExxonMonil had already dropped their 2020 budget by 30% (Ghosh).
It has been a tough few weeks in the press for ExxonMobil. In late July it was reported by multiple sources that ExxonMobil was effectively laying people off through PIP. A PIP or “Performance Improvement Plan” is essentially a severance offer to leave the company. According to Forbes, ExxonMobil made changes to their performance evaluation process in order to justify more job cuts. Back in April they raised the number of employees who were in the “Needs Significant Improvement” (NSI) category from 3% to 8% of all US workers (Gross). Employees who were placed in the NSI category qualified for a PIP. ExxonMobil employs about 75,000 people, so an 8% reduction would result in about 6,000 people out of a job. According to Business Insider, the changes made to ExxonMobil’s employee evaluation process were an attempt to, “cut more jobs without traditional layoffs,” (Jones).
Seba, Erwin. “Exxon to Suspend Company Match to Employee Retirement Plans in October: Sources.” Reuters, 4 Aug. 2020.
Jones, Benji. “Leaked Documents Reveal Exxon Changed Its Employee Ranking System amid the Coronavirus Pandemic, Putting More Workers at Risk of Getting Cut.” Business Insider, 24 July 2020. https://www.businessinsider.com/leaked-documents-exxon-changed-performance-reviews-cut-workers-2020-7
The Retirement Group or www.theretirementgroup.com
Ghosh, Palash. “Exxon Mobil Considers Layoffs, Spending Cuts To Save Its Dividend.” International Business Times, https://www.facebook.com/IBTimes, 30 July 2020, https://www.ibtimes.com/exxon-mobil-considers-layoffs-spending-cuts-save-its-dividend-3019739.
Hiller, Jennifer, et al. “Exxon Prepares Spending, Job Cuts in Last Ditch Move to Save Dividend.” Reuters, 30 July 2020.
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