The company will reverse the cuts because it recognised the impact they have had on its 37,000 employees, said Michele Drake, a spokeswoman for Agilent.
"For over a year, they have worked hard, and we recognised the sacrifices they are making," Drake said.
Drake said Agilent made the pay cuts because the economic downturn had put pressure on the company. It still has not returned to profitability and does not expect to do so until October. But Drake said that did not affect the company's decision to restore the pay.
Agilent's 18,000 workers in the US took a 10% pay cut in May 2001. In February, the company restored 5% of that cut to non-managers.
Drake said she did not know how the pay cut was implemented in Agilent's overseas offices.
Agilent's move drew praise from Robert Austin, an assistant professor of IT management at Harvard Business School and staffing expert David Weldon.
"It is a very constructive, enlightened thing that I think they are doing," Austin said.
Austin said companies often hurt themselves when they lay off employees or cut pay to make up for financial shortfalls. But he said that often amounts to cutting intangible assets and could damage the value of the company.
Austin and Weldon said such actions hurt employee morale and good will.
"When you reduce salaries to your employees, it comes at a very high price in employee loyalty," Weldon said. "Employees don't like to backtrack on careers and benefits, and when you cut pay, you essentially turn the clock back on them."
Weldon said the other problem with pay cuts is that employees know from that point on, if they want to advance in terms of salary and benefits, they have to work elsewhere.
And while the job market may be down now, it will not stay that way permanently. So when times turn around, employees will remember the cut and that might cause them to leave, he added.