Telefónica layoff program to cost 400,000 euros per worker

Telefónica's labor force adjustment plan (ERE) for its Spanish unit Telefónica de España will cost the telecoms giant about 400,000 euros per sacked worker, a works committee member said Wednesday.

Jesús Vesperinas, the secretary general of the CCOO labor union's telecommunications sector, said that at a meeting with management held on Tuesday, Telefónica announced it was returning to its original plan to shed 6,500 jobs, or some 20 percent of Telefónica España's workforce, over three years instead of 8,500 over five years. The reasons, the telecoms company said, were the high cost and the payment of compensation to the government for state unemployment benefits resulting from the layoffs.

The reinstated plan will cost the company some 2.6 billion eurosinstead of 3.4 billion euros for the 8,500 redundancies.

"The new proposal shows Telefónica's improvisation and the lack of rigor of its objectives and arguments," CCOO said in a statement.

Vesperinas said the unions were also unhappy with Telefónica's proposal to pay workers 66 percent of their salary until they retire instead of the 70 percent agreed in a previous ERE in 2003. The layoff plan is open to workers over 54 years old.

Labor Minister Valeriano Gómez said last week Telefónica would have to foot the cost of unemployment benefits and social security payments of workers it sacks.

The Labor Ministry is drawing up legislation that obliges profitable companies to pay the costs to the state of laying off workers under an ERE. Telefónica's earnings hit a record 10 billion euros last year.

Telefónica announced its retrenchment initiative at the same time as it unveiled a bonus scheme for some 1,900 managers worth 450 million euros over five years. Chairman César Alierta justified the scheme as necessary to hold on to talent, adding that the layoffs were needed to keep the company competitive.

Five-year agreement

Telefónica estimates it will have to pay the state some 400 million euros under the ERE, while unions estimate the amount at some 300 million euros.

As part of the plan, Telefónica also wants labor to accept a new collective agreement that lasts five years. Management and labor representatives are due to return to the negotiating table on June 7.