Wave of early retirement schemes

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In an effort to reduce operating and payroll costs, a number of Greek enterprises, mostly in the area of banking and public utilities, turned to early retirement and other 'voluntary exit' schemes in late 2004. The reaction of trade unions varied from case to case, with plans to cut the workforce at the Hellenic Telecommunications Organisation (OTE) proving particularly controversial.

In the second half of 2004, there was a sharp increase in the number of initiatives to introduce early retirement schemes, involving a range of enterprises in the private and broader public sector. In the view of management in such companies, the use of early retirement schemes is imperative in most cases. One aim is to renew the age structure of companies' staff; while others include the acceleration of structural changes in work organisation, in order to boost companies’ competitive market positions, reduce operating costs and hire younger, better-qualified employees.

The enterprises concerned include many public utilities and banks, though the phenomenon can also be found, to a lesser degree, in other sectors (eg INTRACOM SA in telecommunications). The schemes take varying forms in each case. As a result, the trade unions are in agreement in some cases, whereas in others they strongly disagree. This was highlighted in mid-October 2004 at a special meeting involving the Greek General Confederation of Labour (GSEE) and union federations in banks and the Hellenic Telecommunications Organisation (OTE), which decided on the coordination of activities and industrial action. Specifically, the meeting decided on trade union action with a view to:

• avoiding obligatory collective 'voluntary exits' of staff with damaging effects on labour relations;

• safeguarding in all cases employees’ interests by ensuring terms whereby enterprises implementing voluntary exit schemes at the same time meet their relevant obligations to employees and social insurance funds by hiring new staff; and

• making no changes in the 'social nature' of public utility and banking enterprises, whereby operating costs are passed on to tariffs and services provided to citizens.

In addition, the GSEE executive met on 18 October 2004 with the Minister of Economy and Finance. Among the demands the unions put forward was the implementation of voluntary exit schemes that do not adversely affect labour relations or social insurance funds, and that guarantee conditions of efficient use of staff.

Banks

In recent years, many Greek banks have conducted 'voluntary exit' schemes for their employees, aimed at lowering operating costs and at the same time achieving the necessary restructuring to allow them to implement their strategic planning. The banking sector has undergone important changes in recent decades, due to mergers and denationalisations of various banking groups, with significant repercussions in the field of industrial relations. Voluntary staff exit schemes are in most cases accompanied by financial incentives for employees.

The Greek Federation of Bank Employee Unions (OTOE) states that there have been cases where employees are, sometimes directly and sometimes indirectly, presented with dilemmas forcing them to accept voluntary departure. This is why voluntary exit has been a focal point of confrontation between Greek banks and the unions in late 2004. OTOE and individual unions such as the National Bank Employees Union (SYETE) have repeatedly taken a stand against the implementation of such schemes if certain basic conditions are not met. These conditions include:

• ensuring their voluntary character; and

• hiring a proportionate number of new employees, so as satisfactorily to offset losses of social insurance contributions and avoid work intensification and worse working conditions.

Accompanying recent early retirement schemes has been a parallel discussion that was recently initiated on resolving the problems of the banks' specific social insurance system, made imperative by the obligation to apply international accounting standards. The deficits of banks’ social insurance funds total some EUR 2 billion, and on the basis of international accounting standards, banks’ operating results for 2005 must include provisions for their financial obligations to these insurance funds.

The most recent attempts to reduce staffing through voluntary exit schemes have been carried out by the National Bank of Greece, Commercial Bank, Alpha Bank and Euro Bank. The scheme at the National Bank involved the largest number of employees, most of them women. According to the SYETE union, two out of three employees taking voluntary retirement held jobs in bank branches. This, the union argues, will have an adverse effect on customer service and play a direct part in exacerbating working conditions. In early November 2004, National Bank employees took industrial action demanding that new staff be hired. The unions, however, took a generally cautious attitude to the changes. Thus was not only because of various proposals by management to resolve the problems of the banking social insurance system, but also by a recent decision to sell off to institutional investors the last package of National Bank shares (7.5%) owned by the Greek state. In effect, this decision opens the way for full privatisation of the National Bank, since now only the part of share capital belonging to social insurance funds still remains under state control.

OTE

A recent attempt at restructuring in the OTE group of telecommunications companies in the form of the voluntary exit of part of the staff provoked strong opposition from the unions. OTE management set out its proposals at a special seminar attended by international financial firms and investment circles in August 2004. At the seminar, the OTE managing director highlighted the group’s leading role in Greece’s economic activity. He went on to argue that the problems faced by the group in recent times have been due almost exclusively to an excessive number of staff, claiming that there are almost twice as many employees as necessary. Alongside these assertions, he stated that some of the problems are traceable to staff’s existing employment status and the content of the general staff regulations.

The unions’ reaction was strong. In late September, representatives of the OTE Employees’ Federation (OME-OTE) met with OTE management. An assessment of financial data for 2004 was presented at the meeting, and management stated its intention to reduce the workforce by 6,250 during 2005. The staff to be made redundant include all employees over the age of 50 who have completed 27 years of service. This represents a reduction of close to 40% in the workforce. The union expressed its opposition by immediately terminating the meeting.

At present around 20,000 people are employed in the OTE group of companies as a whole, whereas in 1981 the number of employees stood at 32,500 (GR9902112F). This is largely because over time large numbers of employees have retired for the following reasons:

• some became eligible for pensions;

• some participated in voluntary exit schemes (eg 1,115 employees retired in 1998, with the incentive of pension supplements amounting to 10 months’ pay after 32 years of service); and

• recruitment freezes (no staff were hired between 1991 and 1999)

OME-OTE gave a press conference aimed at presenting the unions’ opposition to management’s proposals. OME-OTE also took part in a special joint meeting with GSEE and OTOE. At a meeting held on 13 October 2004, attended by members of management and representatives of OME-OTE, the divergence of opinion between the two sides on how to restructure the company and renew its staff through voluntary exit schemes was underlined. The union remained adamant that a voluntary exit agreement should be reached by consensus resulting from frank dialogue with the group’s management, and refused to negotiate on the possibility of abolishing the general staff regulations, altering industrial relations or failing to carry out intended recruitment. The union was also concerned about the pressures caused by former staff being made reliant on the social insurance funds.

These demands were later voiced to the Minister of Economy and Finance. The Ministry decided that no legislative initiatives would be taken on the issue of voluntary exit schemes at the company without prior agreement between OTE management and OME-OTE. It also ruled out the possibility of obligatory early retirement, which in practical terms means that the government disagreed with the initial plan to shed employees over 50.

A few days later the OME-OTE executive met the Minister of Transport and Communications. At this meeting, the union obtained a government commitment that the state would continue to own 34% of OTE share capital and that any voluntary staff exit scheme would have to be the outcome of agreement between management and the employees’ federation.

Nevertheless, OTE management returned in late November with a new proposal, along exactly the same lines as the previous one. The new proposal:

• provides for the retirement of 6,200 people before the end of 2005;

• sets the minimum age limit for people included in the exit scheme at 50; and

• sets the number of years of service for obligatory inclusion in the scheme at 15 to 27.

Furthermore, according to the new proposal, the scheme will be financed by the retirement of high-paid executives, some of who may be re-hired outside the scope of the general staff regulations. The OTE managing director stated that: 'We are in the final stages of preparation of planning for staff cuts through voluntary exit, which we will present to the government and the unions before the end of the year.' Therefore the coming period is expected to bring important developments on this issue.

Commentary

There has been a particularly high number of experiments in company restructuring via extensive implementation of voluntary staff exit schemes in recent years. However, their recent reappearance in the banking and telecommunications sectors is directly associated with the broader changes in the social insurance system and the liberalisation of the telecommunications market on terms that better enable companies to readjust the volume of their workforce and allow for reductions in payroll and social insurance contribution costs. On the other hand, collective job losses through voluntary exit schemes, even if combined with favourable terms and better benefits for employees, may worsen working conditions by bringing about more permanent and broader changes in the field of industrial relations in the future. (Lefteris Kretsos, INE/GSEE-ADEDY).