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Ad giant WPP is cutting pay by up to 20% across its agencies, and some insiders think it won't ever come back

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  • WPP, the world's largest ad holding company, enacted voluntary pay cuts and other cost-control measures in response to the economic effects of the coronavirus pandemic.
  • Some sources said leaders suggested agencies cut top salaries by as much as 20% for 90 days and that they doubted the money would come back.
  • CEO Mark Read said 3,000 senior leaders had accepted the voluntary cuts.
  • The measures are part of an effort to keep the company stable as clients cut ad spending and wait for consumer spending to rebound.
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WPP, the world's largest ad holding company, began instituting voluntary pay cuts across its agencies earlier this month.
Sources said some top executives forfeited up to 20% of their salaries and that many employees don't know that they may soon be asked to give up some of their pay. During an April 29 earnings call, CEO Mark Read said about 3,000 senior leaders have already accepted the cuts.
The cuts are the beginning of an effort to reduce costs throughout 2020 as clients slash ad budgets in response to the economic slowdown caused by the coronavirus.
Business Insider spoke to nine current and former WPP employees, all of whom are known but requested anonymity because they aren't authorized to discuss the matter.
A WPP spokesman declined to comment.

WPP executives encouraged its agency leaders to take tiered salary cuts

WPP, which employs more than 100,000 people across such agencies as Ogilvy, Mindshare, and Burson Cohn & Wolfe, had already announced cost-cutting measures on March 31, including hiring and pay freezes, an end to discretionary spending like awards shows, and mandatory 20% pay cuts for its executive committee and board of directors over the next three months.
Company leaders also encouraged agencies to cut pay by salary or seniority.
Three people confirmed the voluntary salary cuts will work this way: Employees making more than $300,000 will have their pay cut by 20%, while those making $200,000-$300,000 will take a 15% cut and those making $100,000-200,000 will take a 10% cut.
Two of these three people said only C-suite employees who have been in negotiations over the past two weeks or have already signed contracts know about the pending cuts.
Mark Read told Business Insider that the idea came about when some senior employees approached company leadership and volunteered to take salary cuts, after which WPP issued guidelines and left implementation up to each agency.
The seniority option was designed for regions like the Asia Pacific where executive, senior, and mid-level staffers may be paid differently than their counterparts in the US and Europe, according to one senior WPP executive.

Some executives don't expect their pay to return to normal after 90 days

Two people familiar with the cuts said they would last for 90 days before a reassessment.
But one told Business Insider "no one thinks the money will come back" because the global economy will not return to its pre-pandemic state by mid-summer.
A senior executive said WPP leadership didn't establish a numeric savings goal, but asked agencies to maintain profit margins sufficient to buffer against further client spending cuts as the pandemic's effects continue.
How they achieve these savings — whether through furloughs, pay cuts, layoffs, or some combination thereof — is up to them. For example, the executive said his agency will not cut the pay of anyone making less than $200,000 but hopes about 75% of employees above that salary agree to forfeit 15% or more.
A former WPP staffer said some agencies have also terminated all freelance and contract employees, herself included.

Agencies have been hit hard as clients cut ad budgets

In the biggest sign of the ad industry's challenges, Google on April 28 reported a "significant slowdown" in ad revenues. Google is the largest ad sales platform and one of WPP's most important clients.
Even big spenders in some of the few industries that remain active, like fast food, have cut their ad budgets by up to 50% as foot traffic falls.
Ad agencies and holding companies have already felt the impact.
WPP's Grey New York instituted furloughs and pay cuts to avoid layoffs. Executives at rival holding company Dentsu Aegis Network were asked to cut salaries by an average of about 10%.
Omnicom said that furloughs and layoffs were coming and made significant cuts at its agencies including BBDO and TBWA.
Several IPG agencies such as Deutsch and Hill Holliday have also reduced staff. On an April 22 earnings call, CEO Michael Roth said the second quarter of 2020 would be "very difficult," with further layoffs "unavoidable." 
Got more information about this story or another ad industry tip? Contact Patrick Coffee on Signal at (347) 563-7289, email at pcoffee@businessinsider.com or patrickcoffee@protonmail.com, or via Twitter DM @PatrickCoffee. You can also contact Business Insider securely via SecureDrop.
SEE ALSO: Fast-food chains like Subway and Burger King have been hit hard by the coronavirus, with some slashing ad spend by as much as 50%. Here's how they've adapted their marketing.
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