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HP suspends pay raises during slump

The latest tactic in a string of cost-cutting measures has the company suspending pay increases until business recovers from the tech slump.

After already delaying raises for its employees, Hewlett-Packard has decided to suspend pay increases until business recovers from the ongoing slump in technology spending.

An HP representative confirmed that the company sent out a memo last week announcing the freeze in raises. In December, the company said it was delaying raises by three months. Some of those delayed raises are going into effect this year, but all new raises, starting with the ones delayed from November 2001 to February 2002, are now on hold indefinitely.

"The recent terrorist attacks in the United States have worsened the global economic downturn, affecting nearly every industry--from high-tech to retail to travel," HP said in a memo to employees.

The move is the latest in a string of cost-cutting measures at HP, including twice asking workers to use up vacation time. HP has also had several rounds of job cuts, including some unspecified cuts made last week and 6,000 job cuts earlier this year.

"Every action--from deferring salary increases for three months to taking extra (vacation) days to cutting back on discretionary spending--has helped," HP said in the most recent memo. "But these are extraordinary times that demand extraordinary actions. We must exercise creative alternatives, including demonstrating flexibility in our wage structure and compensation plans."

The decision to suspend raises also comes as HP is trying to absorb a wave of negative reactions to its proposed merger with Compaq Computer. On Tuesday, the family of co-founder William Hewlett, including HP board member Walter Packard, announced its opposition the deal, while David W. Packard, son of co-founder David Packard, has now joined the Hewlett family in opposing the deal.

The separate David and Lucile Packard Foundation, which holds roughly 10 percent of HP's stock, has not yet taken a stand on the deal.