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Sun-Times Media Group Cuts Nonunion Employees’ Pay

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Sun-Times Media Group announced today that it is cutting the compensation of nonunion employees earning between $25,000 and $100,000 a year by 8 percent. Those earning more face an 11 percent cut in pay.

Here is the memo sent to employees earlier today, which was leaked online less than an hour ago:

TO: All Non-Union Employees

FROM: Jeremy Halbreich
Chairman of the Board and Interim CEO
Rick Surkamer
President and Chief Operating Officer

DATE: September 9, 2009

RE: Compensation Reductions

Today we made the announcement that STMG Holdings, LLC, has entered into an agreement to purchase substantially all of the operating assets of Sun-Times Media Group, Inc. While much needs to happen over the next several weeks to complete a transaction, we are confident this means that our many businesses have a bright future ahead of them. This is an important milestone in our effort to secure the future of our newspapers and Web sites and to preserve as many Sun-Times News Group jobs as possible.

In our discussions and negotiations with the principals of STMG Holdings, LLC, we have underscored our commitment and they have made clear the critical importance that the businesses they are buying completely eliminate the cash burn and become self-sustaining and profitable in the future. The new owners are making a very significant financial commitment and they are committing substantial financial resources to our businesses that will directly support necessary capital expenditures and defined operating strategies to foster growth and innovation. While we have made tremendous strides toward this goal in the past months of eliminating the cash burn, there is still more that must be done.

We appreciate all of the sacrifices that our employees have made to date—and it is important to note that these sacrifices have been borne across our entire workforce: management, non-union and union employees.

However, while we have managed to significantly reduce the cash burn rate at the Company, it has not been completely eliminated. As a result, more needs to be done to establish a secure, sound business model for the Sun-Times News Group going forward.

Accordingly, we are announcing today a base pay reduction for all non-union employees who make more than $25,000 in annual base pay. The only exception will be the advertising sales staff below the vice president level, because they have already had their total compensation decline significantly due to the downturn in advertising revenues. While this is a difficult, unexpected and tough measure for the Company to implement, it is necessary along with the financial resources committed by the new ownership group to ensure a prosperous future for the Company’s newspapers and Web sites and employees.

The pay reduction program works like this: the first $25,000 of any employee’s base pay will not be reduced; base pay between $25,000 and $100,000 will be reduced by 8 percent; and base pay over $100,000 will be reduced by 11 percent.

Additionally, we have sent letters to our bargaining unit leaders today seeking their formal approval of a set of economic and work rule-related changes required by the Buyer. These are a required condition to be met before we can close a sale. The Buyer has required that agreement to these terms be achieved in writing no later than Tuesday, Sept. 29, 2009.

Please read the following frequently asked Q&A below for more details on the new cost reductions:

Q. Why has the Company decided to mandate a salary reduction program?
A. Our Company has been operating in an incredibly challenging environment. A tough economy and a significant, prolonged downturn in print advertising revenue, which has affected newspapers across the country, have continued to have a severe impact on the Company’s financial performance. We continue to need to drive revenue and pare expenses to put our business on a solid footing so that we can ensure that our new owners will be able to complete the transaction to buy the Sun-Times News Group business and secure the substantial financial commitment they are making to our enterprise. A salary reduction program is a tangible way to reduce expenses.

Q: Is everyone going to participate?
A: This program will be applied to all independent, non-union employees including senior management, director and manager personnel. The only exception will be the advertising sales staff below the vice president level because they have already had their total compensation decline by well over the levels described above due to the downturn in advertising revenues. Employees represented by third-party bargaining agreements already have undergone pay reductions and other measures, and they will be asked to make ongoing and additional sacrifices.

Q. How much money is the Company saving by doing this?
A. The estimated savings is very significant. It represents an important element in eliminating the cash burn rate at the Company and helping the Company reach profitability.

Q. Have other companies done this?
A. Many companies in many industries have used salary reduction programs to cut costs. Several of our media peers have implemented similar programs. As the secular and cyclical challenges facing our industry have persisted over the past 12-18 months, it becomes essential to align the cost base of our Company’s operations with the new revenue realities of today’s newspaper publishing businesses.

Q: Is this a permanent salary reduction?
A. This reduction is indefinite.

Q. When will the salary reduction go into effect?
A. For Chicago Sun-Times employees the salary reduction will appear on September 25, 2009 paycheck. For employees of Fox Valley Publications, Midwest Suburban Publishing, Post-Tribune and Pioneer Publications the salary reduction will appear on the October 2, 2009 paycheck.

Q. Is the reduction taken on my total salary or my base salary?
A. The salary rate is defined as the bi-weekly salary the employee is scheduled to receive. It does not include:

o Shift or other differential pay.
o Commission pay

Q. Can you provide an example on how the salary reduction will work?
A. See below:

Example 1. An employee earning $50,000 in annual base salary would see a 4 percent reduction overall of the annualized base salary – 0 percent on the first $25,000 and 8 percent ($2,000) on the next $25,000. That would be total a salary reduction of $2,000 annually resulting in $48,000 gross base salary for the year.

Example 2. An employee earning $125,000 in annual base pay would see a 7.0 percent reduction overall of the annualized base pay – 0 percent on the first $25,000; 8 percent ($6,000) on the next $75,000 and 11 percent ($2,750) on the next $25,000. That would be a total salary reduction of $8,750 resulting in $116, 250 gross base salary for the year.

Q. What part of my salary will be used to determine the respective salary reduction?
A. An employee’s current annual salary rate will be used to determine the reduction amount.

Q. How will the plan work for part-time employees?
A. Part-time employees will have their salary reduced proportionately.

Q. Are there any plans for additional unpaid furloughs?
A. No, there are no scheduled furloughs for the remainder of the year.

Q. Will monthly health insurance premiums be adjusted for the rest of 2009?
A. No.

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Written by newscycle

September 9, 2009 at 12:34 pm

Posted in Sun-Times Media

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