ATLANTA First Data Corp., which continues to hemorrhage red ink from its 2007 leveraged buyout by Kohlberg Kravis Roberts & Co., is suspending 401(k) contributions to employees and replacing cash bonuses with stock as part of its new CEO’s strategy to return the processing giant to profitability.
The move was announced to all 24,000 of the company’s employees on Monday.
The pay overhaul takes effect Jan. 1 and will save the company about $60 million in cash next year, First Data said. The yearly total is expected to grow to $100 million by 2017.
First Data reported losses of $179 million for its fourth quarter last year, and $701 million for the full year, after a loss of $516 million for 2011.
CEO Frank Bisignano, who recently came over from JP Morgan Chase, also wants to align the pay of top executives, rank-and-file workers and everyone in between more closely with owner KKR & Co., which took First Data private in a $27-billion LBO in 2007.
First Data now matches 3.5% of employee contributions to 401(k) retirement savings plans. Under the new plan, those contributions will be suspended, with employees getting stock instead. The changes will broaden employee stock ownership, now roughly 1%, to nearly every First Data employee, including those at the company's headquarters and a customer service call center in Omaha, Neb.
In addition, about 3,000 managers will get roughly half of their annual bonus in stock. Those employees previously received half of their bonus in immediate cash, plus a long-term cash payment that vested over three years.
