Eircom and unions reach a deal to cut 1,200 staff

12 May 2009

The economic environment has adversely impacted Eircom and unless the company can achieve savings of €130m by 2011 it will find it difficult to perform strategically, it said today as it implemented a two-year pay freeze for all staff.

The company said it has reached an accord with the various trade unions that represent its workforce, and voluntary pay cuts, as well as mandatory cuts in mileage rates and subsistence rates have been put into action.

Eircom and the unions have agreed that a total headcount reduction of 1,200 people by 30 June, 2011 will have to be achieved.

As well as a two-year pay-freeze, the current rates of mileage will be cut by 25pc and subsistence rates have also been chopped 25pc. Payments of cost of substitution will also end on 1 July. Time in lieu is also to go, unless in exceptional circumstances.

Eircom staff who were in bonus agreements will find there will be no bonus payments for the next two years for staff earning over €35,000 a year.

Because pay costs account for a substantial portion of Eircom’s total cost base, the company has asked operational staff to voluntarily accept a 10pc pay cut, while operational workers will be asked to accept a 5pc pay cut.

According to the accord: “Eircom’s net debt is too high, with excessive annual interest costs. Its covenants place stringent constraints on activities and pose serious risks to viability. The defined benefit pension scheme issue, if not remediated, adds further significant balance sheet strain.

“Without de-leveraging, debt covenants will be breached, rendering many strategic options redundant and limiting the ability to deploy necessary capex in support of the strategic directions required.

“Eircom urgently needs to determine an overall vision and strategy framework for the business. Relations with Government and its key development agencies need to be on a strategic and progressive footing, focused on advancing the development agenda.

“The telecommunications industry needs a modern national infrastructure provided by a viable common carrier. A supportive public policy environment and a new regulatory model are accordingly key objectives,” the document stated.

The acting group CEO of Eircom, Cathal Magee, explained: “The company and the union representatives have demonstrated the willingness to make difficult but necessary decisions to ensure the long-term competitiveness of Eircom.

“Today’s announcement is an important first step. Management recognises the very significant impact of the current economic environment and is committed to securing far-reaching cost reductions, and an overall vision and strategy framework for the business.”

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years