"They started by announcing a reduction of 50 percent in our salaries for the months of November and December before informing us that four out of 15 employees are to be fired,” the young engineer told L’Orient-Le Jour. "The director of human resources told us that we would be a priority if the situation is back to normal and that the company would again need to recruit.” Bashir is doubtful that this will be the case.
Bashir’s story is not an isolated incident. The private sector, which has been suffering a major economic recession for several years now, has been hit hard by the liquidity crisis in Lebanon that started in September as well as by a drastic drop in activity since the beginning of the popular uprising on October 17. Companies were already in a precarious position, which has been aggravated by the implementation of restrictive measures by banks, leading to a parallel exchange rate and a fall in the purchasing power of people in Lebanon. As a result, a large number of these companies have been forced to reduce their payroll, at least momentarily.
"Over the past three years, our team went from 120 employees to 40. But since the beginning of the demonstrations, our situation has worsened. We received 70 percent of our salaries for the month of November, and we will only receive 50 percent for December. Some of our employees were forced to take unpaid leave, waiting to see how the situation will evolve. But currently, the list of clients who are not paying us is getting longer,” says Hiba*, an architect who has been working for an engineering firm for five years.
In a survey conducted by Infopro at the end of November on a sample of 300 companies, 91 percent of the companies saw their turnover fall by an average of 66.3 percent compared to the period before October 17. As a result, nearly 10 percent of these companies stopped or temporarily suspended their activities, and 22 percent reduced their personnel––by an average of 60 percent––over the same period.
Infopro estimates that there have been 160,000 job cuts––temporary or permanent––since October 17. An employee at a car dealership told L'Orient-Le Jour that 50 of his colleagues were recently dismissed while the rest of the staff saw their fixed salary decreased by half and their variable salary (commissions on sales) completely removed.
Even companies that haven’t reduced their workforce are reducing their employees’ salaries. Almost 34 percent of the companies surveyed by Infopro have reduced their wages, and 61 percent of them have reduced hours of work or imposed unpaid leave. In 49 percent of cases, this reduction takes the form of a decrease in the salaries––39.7 percent on average. "Business owners know full well that by firing some of their employees, it will be very hard for them to find work in the current context. They are trying to avoid this by removing bonuses or temporarily reducing wages. Some chose to implement larger cuts on higher wages in order to preserve the lowest ones," says Chaker Saab, CEO of Tinol and president of the Family Business Network Levant.
Unsurprisingly, the commercial sector has been the most severely affected by the current crisis: 95 percent of companies have seen their turnover fall by an average of 67 percent since October 17, and 31 percent of them have reduced their workforce to about 50 percent on average, such as a large chain of luxury stores.
"Essentially, small and medium-sized businesses are the ones that have suffered tremendously from the cancellation of their banking facilities, said Nabil Fahd, vice-president of the Beirut and Mount Lebanon Chamber of Commerce. They are no longer able to import as many product categories as before and are forced to reduce their fixed costs. For example, they are renting smaller warehouses, but often they also have to tackle their payroll. As for large importers, they have significant capital and therefore more capacity to sustain themselves, at least for the coming three months.”
Fahd, who is also president of the Union of Supermarket Owners, said that mass-market retailers have so far not made wage cuts or layoffs: "They expect a large influx during the holidays, but I think some of them will be forced to take similar steps later. "
The industry and service sectors were not spared either, as 20 percent of companies operating in these sectors had to cancel jobs. The most drastic workforce reductions have been recorded in the industrial sector, as 44 percent of these reductions affected more than 75 percent of the workforce. Panda Plast, a factory that produces plastic products, has dismissed 100 of its employees, retaining only 250, Rindala Kassem, the company’s marketing director, told Le Commerce du Levant.
"The fact of having to buy dollars on the parallel market in order to be able to import raw materials has increased the cost of production. Suppliers are providing less and less payment facilities and often require cash payments. Many manufacturers will suffer losses this year. Some witnessed their sales decline by 50 percent,” said Saab.
It is also very difficult at the moment to assess the impact of the current crisis on employees in the informal sector, which accounts for nearly 30 percent of Lebanon’s GDP, according to the Central Statistical Office, and where the economic situation is generally more precarious.
* The names have been changed
(This article was originally published in French in L'Orient-Le Jour on the 6th of December)
Bashir*, barely 30 years old, found out last week that he was dismissed from his job for economic reasons. At the end of the month he will have to leave the start-up he started working for over two years ago. Back then, he was convinced that it had a promising future. In recent months, things have changed. "They started by announcing a reduction of 50 percent in our salaries for the months of...