Local
articles | 20 January 2014

Co-op exit scheme to save €16.5m in 2014

The attractive voluntary redundancy scheme approved for Cyprus Co-op workers will save the ailing Co-ops €16.5m in 2014, adding to 2013 savings of €1.5 million.

Despite a €104,000 cap, the redundancy compensation agreement allows for a paradoxical scenario where employees close to the age of 65 will be paid more as incentive to leave than they would if they were to remain employed until retirement. A Co-Op Central Bank (CCB) spokesman acknowledged the paradox but said that the basic aim, which was to make the scheme attractive to employees, was “achieved in full.” Further, the spokesman said that the number of people close to retirement was very small, rendering the additional cost incurred “negligible.” Lastly, according to the CCB, the reduction in personnel will provide additional benefits to the bank besides payroll cost, in terms of employer contributions like provident fund and overtime payments, which more than offset the extra compensation cost in these cases.

At a recent news conference following approval of the agreement by unions’ regional assemblies, the CCB’s executive committee head Nicolas Hadjiyiannis commented on the “historic” deal, saying it secured cost savings of €16.5 million in 2014, adding to 2013 savings of €1.5 million. Hadjiyiannis said that the goal is for 10% of the 3,000 co-op employees to exit through the voluntary redundancy scheme, particularly targeting those over 45. The employee voluntary redundancy scheme is part of the troika-mandated consolidation of co-ops. The agreement determines payouts as the lowest between the sum total of an employee’s salaries to be received until the retirement age of 65 or double the employee’s redundancy fund as at termination.

The base month for compensation calculations was December 2013, before salary cuts on all co-op employees were imposed. The cuts came into effect on 1 January 2014 and forced a 3.0% cut on salaries across the board, and additional tiered salary cuts ranging from 8.0 to 25%. The slashes have reduced payroll costs, the largest item at 55% of co-ops total operating budget, by 15%. Further consolidation measures for co-ops include a reduction of the employer’s contribution to the employees’ provident fund to 5.0% until 2018, and 12% after that. The scheme will be officially presented to employees on February 1 and will remain open to them for three to four weeks. In scope are all co-op employees, excluding those of the CCB who are member of bank employees’ union ETYK.

According to Hadjiyiannis, talks with ETYK regarding a similar voluntary redundancy plan for some 300 CCB employees are expected to conclude by next week. Consolidation measures were imposed in co-ops in exchange for a €1.5 billion recapitalisation injection via a government-funded bailout, and they form part of the institutions’ restructuring plan. The plan, a troika-imposed precondition on all bailed-out financial institutions, is currently under review by CCB boss Marios Clerides, and will be submitted to the CCB executive committee for approval. Clerides confirmed that the restructuring plan would be ready by mid-next week, and revealed that an investigation into loans granted by co-ops in violation of rules was underway, and any employees involved “will most likely lose their jobs.”

Source: Cyprus Mail

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