How Aon avoided laying off employees

Aon Canada employees will see their salaries reduced as part of an effort to ensure that no one at the company is laid off as a result of the economic upheaval created by the COVID-19 pandemic.

The brokerage provided Canadian Underwriter with a copy of global CEO Greg Case’s Apr. 27 letter to employees outlining Aon’s plans. The company confirmed that the announced moves affect Canadian staff.

Aon executive officers and board directors named in the letter will see their salaries reduced by 50%. About 70% of Aon staff around the world will see their salaries reduced by 20%, in accordance with local practices. The remaining staff members won’t see reductions after Aon “worked with local leaders around the world to determine the most equitable way to apply a temporary salary reduction to our broader colleague base and have developed a tailored approach based on a set of criteria, including the cost-of-living,” Case’s letter stated.

The moves will be effective May 1.

The company is moving ahead with other cost-saving measures for operational flexibility. For example, it has “substantially curtailed” money spent on third-party vendors and contractors. The Aon Business Services team has also been asked to take additional steps, Case’s four-page letter said.

Stock buyback plans have been shelved and those funds have been set aside. “It’s important to note that we intend to preserve our dividend,” Case wrote. “Paying a regular dividend is consistent with maintaining an investment grade rating and fundamental to accessing the capital markets.”

However, slowing spending and halting buybacks are not enough to ensure flexibility, Case said. That’s why trimming salary was a necessary move.

“Our objective is that everyone emerges from this challenging period in as good a place as possible; unfortunately, it is too early in this economic crisis to determine how we ultimately mitigate these actions,” he wrote. “Our commitment is that we will act with integrity to protect our colleagues and our firm. We will continue to apply our principles-based approach to how we manage through this crisis and review these actions monthly.”

Aon has adopted a set of principles-based guidelines going forward. First, Case said it was important to look after staff. “We will always look to protect our colleagues’ needs. Our value to clients stems fully from the collective capabilities of our colleagues,” he wrote. “The concerns of all other stakeholders are important, but secondary at this time.”

Second, he wrote, a “wait-and-see” approach risks putting the future of the business in jeopardy. As such, the company will “make swift decisions” as necessary to protect itself.

Finally, Aon will focus on what it can control. “This is the hand we have all been dealt. No amount of complaining about it or comparing our approach to others will change the fact set. We own our destiny and we wouldn’t want it any other way,” his letter said.

Layoffs would be an easier way to save money, Case noted, but that would put client services at risk.

“We have spent the last month carefully studying our options and know these proactive steps are the right decision for our firm. We are going on offense to both protect our firm and prepare for the opportunity that lies ahead,” he wrote. “Because as much as these actions reflect a principled decision consistent with our values, it is also a business decision based squarely on client need. We are witnessing a global shift in client priorities not seen in recent history and we must be ready to answer that call.”