Three-year redundancy plan at Telecoms company

The partially state-owned Cyprus Telecommunications Authority has announced a three-year redundancy plan that will initially be voluntary. Approved by all the company’s unions, it will cut staff by between 550 and 600 employees and is expected to save €263.5 million. During the first six-month phase of the scheme, staff will be able to volunteer for redundancy or retirement. More employees will be selected for redundancy during the second phase to meet staff reduction targets.

Background

As part of the reorganisation and modernisation of the Cyprus Telecommunications Authority (CyTA) and with the immediate objective of reducing its operating costs, CyTA announced a voluntary early retirement scheme in December 2013. It aims to cut staff by between 550 and 600 and is expected to save €366.4 million in wage costs between now and 2015. However, the cost of implementing the scheme, including pension costs, is estimated to be €102.9 million.

Due to delays in releasing the necessary funds by the Parliamentary Committee on Financial and Budgetary Affairs, the scheme was not expected to fully operational before February 2014.

There are two phases to the scheme. It was initially calculated that the first phase would cost €12 million which would have to come from a supplementary budget, releasing €9.5 million for the proper payment of pensions and a supplementary budget of €2.5 million.

Funds to implement the scheme in the second half of 2014 and after 2015 will be included in the annual budgets. All the funds have to be approved by the Parliamentary Committee on Financial and Budgetary Affairs.

During the first phase, which was expected run during the first six months of 2014, the retirement of around 150 employees from various categories of staff is planned. In the next period up to 31 December 2015, the exact number and categories of staff will be finalised based on the Organisation’s reorganisation studies. Retirement during the first phase will be completely voluntary, but during the second stage it will be up to CyTA to decide which employees will leave.

During the first phase, the company will have the right to delay retirement dates for up to six months in cases where immediate retirement will create problems for the service.

Parameters and selection criteria

The plan sets out the parameters of the scheme.

  • It will be implemented once a year on a date to be set immediately after approval of the annual budget. For 2014, the retirement date was set for 31 December on condition that the necessary approvals would be received.
  • All CyTA employees who had completed at least 10 years of service on the date the scheme was announced are eligible.
  • Employees who opt for retirement will, apart from the established retirement benefits, be compensated for termination of employment and loss of career. The compensation will be a percentage of the wages the employee would have earned up to the age of 65.
  • Employees retiring early will continue to be pay into the health fund and be covered by the group life insurance scheme.

A counterincentive for younger employees to take early retirement is built into the provisions. The percentage on which compensation is calculated decreases for every month between an employee’s date of redundancy and their 65 birthday.

Compensation is capped at €130,000, and the average is expected to be around €75,000. The formula for compensation does not discriminate between categories of staff so that it is attractive to all levels.

In principle, older CyTA employees have priority for retirement under the scheme which also takes into account their years of service and the financial benefit to the CyTA of their retirement. To guarantee complete transparency, selection of employees for retirement will be based on a combination of the following three criteria, weighted as follows:

  • number of remaining months of service – 50%;
  • years of service with the CyTA – 25%;
  • savings to the CyTA – 25%.

Commentary

The scheme was approved by all the unions active within the company (CY0606019Q). The unions have commented, however, that any unfavourable changes in the scheme’s provisions will make it an unattractive choice for employees, with a negative impact both on the CyTA and on society as a whole.

The Local Authority Workers’ and Employees’ Trade Union (SIDIKEK PEO) has commented that a basic objective of the scheme is to restore the CyTA to health and make it a profitable, competitive organization. This is in contrast to the government’s objectives, which are to create more favourable conditions for its privatisation.

The CyTA’s Board of Directors decided on 29 January 2014 to withdraw from membership of the Employers and Industrialists Federation (OEB), after the OEB criticised the retirement scheme.

Eva Soumeli, INEK

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment