Hewlett-Packard chief executive Mark Hurd says pay cuts of 5% for most HP employees will help offset a 20% decline in revenue and save 20,000 jobs in the company's product divisions.
In first quarter results out yesterday, HP reported revenue growth of 1% on last year and profits of £1.3bn, but Hurd said this was largely due to the HP Services division, buoyed by the acquisition of EDS.
"When you take HP Services out of the mix, it is a very different picture," he said in a letter to staff posted online by All Things Digital.
Although he did not exclude the possibility of some job cuts, Hurd said at a company-wide level, "I don't believe a major workforce reduction is the best thing for HP at this time.
"From a productivity standpoint, you're supposed to reduce head count on par with declining revenue," he wrote.
Hurd said he will reduce his own base salary by 20%, executives' pay by 10% to 15%, and most employees' salaries by five percent.
"In an environment like this, there's no margin for error and no tolerance for inaction," he wrote.
However, Hurd did give employees some hope. He said HP's pay-for-performance strategy had not changed and pay cuts could potentially be made up in bonuses.
"If we outperform, and there is a chance we will, then we will increase the total amount of variable pay," he wrote.
UK union, Unite, has meanwhile said UK employees who have made a key contribution to HP's services revenue will be "astonished" by the pay cut proposal.
Peter Skyte, Unite national officer, said the union would be seeking assurances from the company that any pay reduction would only be with employee agreement.
"Whilethe basic pay of senior executives is being cut, they will more than make up any reduction in basic pay by increases in their executive bonuses brought about by reductions in every one else's basic pay," he said.
HP has recently come under fire from the union for the way it handled its acquisition of EDS in May last year and resultant redundancies.