Bank of Cyprus deadline for voluntary retirement put back

The Bank of Cyprus has put back the deadline for applications to its voluntary retirement scheme until Friday, as the target it had set for staff reductions had not been met.
By Monday afternoon’s deadline, it had received 350 applications for early retirement, although the bank’s restructuring plan envisaged the departure of between 500 and 600 workers.

While one bank executive believed the scheme went very well regardless, a press report suggested that top management was not entirely satisfied with the outcome, especially as the compensation packages, described as ‘generous’, had been agreed with the union Etyk.

Announcing the voluntary retirement scheme in a circular, the Bank of Cyprus CEO, Panikos Nicolaou said: “We have started some months ago a drive to redefine our operational and business model so that the group would become more competitive and efficient.”

With the digital transformation underway and the broadening of digital products and services on offer, it was inevitable the bank would be looking to cut labour costs, which compared to revenue, for Cyprus banks, are among the highest in the EU.

Voluntary retirement schemes have weaknesses as they cannot be targeted at specific services or departments and not at low-performing employees. It is up to a worker to apply for early retirement and while the bank, in its agreement with the union, has the right to reject an application, it is reluctant to do so.

“Rejecting the application of workers, who have set their mind on leaving is not a good idea, as workers would feel resentful and bitter about this,” said a source at the bank.
He acknowledged, that a voluntary exit scheme was not ideal for the bank, as it often meant the best workers would leave while the less capable would choose to stay. There was also the issue of staff staying at departments that were being scaled down or closed while leaving from departments where they were needed, said the bank source.

Bank of Cyprus workers that apply for the exit scheme could receive a compensation package, which is determined by years of service and current salary, as high as €200,000 tax-free.
A total of 2,633 workers have left the Bank of Cyprus through voluntary retirement schemes since 2013, on the same compensation packages being offered at present.

The bank’s management, however, has said the latest scheme would be the last that would be of a voluntary nature and with generous compensation packages. After this the bank would follow the path of redundancies, it was reported.

This was probably a warning to employees at departments that were scheduled for closing, to volunteer to leave. If the target of reducing the number of workers by 500 is not met though voluntary retirement by the Friday deadline, the bank may be forced to issue redundancy notices.