In the end the Bank of Cyprus met its target of reducing its workforce, by between 500 and 600 employees, through a ‘voluntary retirement scheme’. The target had not been met by the original deadline, with only 350 applications being submitted, so it was put back by four days, in the hope that more would apply. The bank had warned that if the target was not met through the voluntary retirement scheme, it would have to make forced redundancies, a threat that worked.

The total cost of the redundancy scheme, according to the bank, would be €99 million and this would reduce its annual labour cost by 19 per cent (€37 million). The average payoff amounts to €180,000, an extremely generous compensation package for staff. What is astonishing is that the Bank of Cyprus board and management gave the compensation package bank employees’ union, Etyk, had demanded, but they did not try to get anything back in exchange for this generosity, apart from reduction of staff numbers.

But as the scheme was voluntary, the bank had no say over which members of staff would leave. It could have ended up losing its best workers, as they would be more confident about finding alternative employment, while there was the strong possibility the less productive and mediocre performers stayed on. By what reasoning does the bank agree to this irrational arrangement, waiving its right to choose the workers it actually wants to lay off and leaving it up to individual workers to volunteer to go? What if all the employees of a particular department decided to leave? Would this not create problems for the bank’s operation?

According to the agreement with Etyk, the bank has the right to reject a voluntary retirement application, but management, understandably, is reluctant to do so, aware that it would be counter-productive to keep an employee that decided to go. It is bizarre how the banks have voluntarily denied themselves of the power to decide who goes and who stays, despite paying a super-premium in compensation packages.

This voluntary retirement scheme is unheard of in the private sector. It was always practised in the state and semi-state companies, like Cyprus Airways and Cyta, because the unions were running the show, the politicians and their appointees on boards not wanting the responsibility of deciding who would be laid off. It was much easier for workers to volunteer for early retirement. But why have the banks, which are profit-making companies, agreed to such an irrational business practice? Does Etyk have so much power it will not even allow bank management to decide which workers it would get rid of?