Unions sign redundancy agreement at Stomana Industry

In mid-November 2008, Stomana Industry, the second-largest steel mill in Bulgaria and a part of the Greek Sidenor Group, announced plans to cut output by around a third and to make some 300 staff redundant. The company’s decision is due to a decline in local customer demand and a reduction in exports caused by the global financial crisis. On 25 November, the company trade unions affiliated to the union confederations Podkrepa CL and CITUB signed an agreement on the social package for the workers dismissed.

Background

Stomana Industry, is subsidiary of the Greek Sidenor Group and is the second-largest steel mill in Bulgaria. The company had strong interests in enlarging its operations in the country and has put into place a significant investment programme of BGN 254 million (EUR 130 million) since 2001 when the company was incorporated into SIDENOR Group. At the beginning of this year it opened a new facility for special steels production which is the largest in the Balkans. A total of 85% of Stomana Industry production is for export. However, recently Sidenor has halted all of its investment plans in Bulgaria for the time being.

Like other companies in the metalworking sector in Bulgaria and world wide, Stomana Industry has experienced serious difficulties in recent months. Falling prices for production and a lack of orders has forced the management to streamline costs and operations.

Measures proposed

In mid-November, the company's management announced measures aimed at reducing the negative effects of the crisis. The measures include the suspension of all investment projects, and the supply of spare parts as well as the redundancy of some 300 staff out of its 1,100-strong labour force. From 1 December, a proportion of the workforce has been made redundant on a compulsory basis, while the remainder is engaged in the annual maintenance of the company's equipment.

It is expected that the crisis will be stronger in the coming year. In view of this and in order to retain workers, the company management plans to introduce part-time schemes from the beginning of next year and to undertake other measures to cut costs.

The unions have initiated negotiations with the employer and have demanded that company management compensate as much as possible the workers made redundant. On 25 November the company trade union organisations affiliated to the Podkrepa Confederation of Labour (Podkrepa CL) and Confederation of Independent Trade Unions in Bulgaria (CITUB) signed an Agreement on a social package for the workers dismissed. This is the first agreement to be reached in the new situation of collective redundancies due to the crisis and is considered to be a success for both parties – employers and trade unions. The main terms of the agreement are outlined below.

Main provisions agreed

The employer’s commitments include:

• to continue to pay additional health insurance contributions for the workers dismissed until the end of 2008 as agreed in the collective agreement;

• to discuss with the OBB Bank the possibilities for restructuring and relieving debt servicing and to preserve the preferential interest rate for dismissed workers;

• to provide to dismissed workers the new year bonus as agreed in the collective agreement;

• to organise free summer vacations for the children of dismissed workers;

• to organise vocational training and retraining according to labour market demands;

• to rehire the workers laid off if the situation improves once more;

• the workers will receive a severance payment corresponding to the value of between four and 10 gross monthly wage payments: the average wage is BGN 1,000 a month.

The trade union commitments include:

• to propose to the branch and central union leadership to initiate discussion in the tripartite and bipartite social partnership bodies aiming at the drawing up of anti-crisis branch and national programmes in response to the expected collective redundancies in the industry;

• to inform the workers on the company situation and on the agreement reached.

Commentary

The financial turmoil has hit the largest export-oriented enterprises in the metalworking machine building and chemical fertilizers industries the hardest. The companies in these sectors are currently facing a considerable drop in demand and lower global prices for their products and some have already started to cut jobs. Mass lay-offs are also expected in the railway transport sector and other firms in the production supply chain. The construction sector is also suffering from the downturn**.**

The situation, which is expected to worsen further in the next year, will require joint efforts and commitment from the public authorities and the social partners in response to the challenges of the crisis.

Nadezhda Daskalova, ISTUR