Greece: Company and employment restructuring

Below we report on the interim findings of an ongoing research project investigating efficient company and employment restructuring in Greece. We look at the current rules and examine how they work in practice with reference to specific cases.

Procedural aspects of restructuring

In Greece, the institutional framework for the employment consequences of company restructuring is provided by the EU Directive on collective redundancies (98/59/EC) (EIRR 296 p.2), reinforced by national provisions. Employers contemplating collective redundancies - defined as the redundancy of at least 2% of employees over a one-month period - are obliged to consult with workers' representatives, with a view to mitigating the consequences for the redundant employees.

The procedure for collective redundancies comprises three stages:

Current practice

Agreements on collective redundancies are rare; the employment ministry has not been willing to authorise many company demands for collective redundancies. In all cases that come to its attention, however, it is keen to stress the necessity for following the procedural information and consultation rules.

The research* notes that recent experience suggests that, because of labour market conditions and the political environment, all cases of restructuring become a political issue, regardless of the scale of the exercise. They inevitably result in parliamentary questions and wide media coverage. This is almost certainly due to the fact that, in most cases, the restructuring has been necessitated by the bankruptcy, closure or relocation of companies. At the same time, successful examples of restructuring exercises that aim to improve company performance are rarely acknowledged.

The research examines a number of recent cases of company restructuring and considers how the employment consequences have been handled. Indicative cases are summarised below.

National Bank of Greece

The main objectives of a recent restructuring process at the National Bank of Greece (ETE) have been:

ETE has sought to fulfil these objectives through implementing voluntary redundancy and early retirement schemes.

A first wave of restructuring took place in 2002, when around 680 employees took voluntary redundancy. This was followed by a major restructuring exercise in 2004, when 1,914 planned job cuts resulted in 1,506 employees participating in voluntary redundancy schemes. Of these, 524 were previously employed at the bank's head office and 982 at branches. The affected employees comprised 10% of the bank's total workforce (7.3% of the ETE group's workforce). It was estimated that this restructuring cost the company €106 million.

Once the voluntary redundancies had taken effect, the bank's management concluded a collective agreement with the unions, which was regarded as relatively generous. The government has since privatised the remaining state-controlled segment of shares, amounting to 7.46% of the total.

ETE is highly unionised, with formalised industrial relations procedures set out in the company personnel handbook. Before the voluntary redundancies could take place, the qualification age for full pension rights specified in the handbook had to be lowered for employees who have completed 35 years' service, from 62 years to 58. This amendment required a company agreement between the bank's management and the main trade union, replacing the previous handbook rules that had been agreed in 2002. In exchange, the union obtained an agreement from the bank giving priority in the bank's recruitment exams for some grades (mainly at middle and low levels) to the children of employees.

A further voluntary redundancy scheme for 2006 has been planned, although it may be delayed to early 2007. It is likely to affect between 1,500 and 2,000 employees.

In addition to the major voluntary redundancy schemes highlighted above, ETE has implemented smaller schemes targeting fewer employees.

Hellenic Telecommunications Organisation

The Hellenic Telecommunications Organisation (OTE) is Greece's main provider of telecommunications services. Having privatised segments of the company, the state still holds 34% of shares.

In autumn 2004, OTE's management announced plans to reduce employment levels by 6,250 employees out of a total workforce of 14,500. Since 1996, 10,025 employees have retired, of whom roughly 8,167 took advantage of redundancy incentives and early retirement schemes.

The company's objectives for 2005 were to reduce overstaffing and also to change the conditions of employment for new recruits, replacing public sector job tenure with private sector status. Initially, management undertook intensive collective bargaining with the company's unions. The bargaining process was interrupted by strike action, although a company agreement on the terms of a voluntary redundancy scheme was finally signed (EIRR 378 p.9). Parliament then had to introduce legislative measures to amend the employment status and the retirement provisions of participants in the scheme. This process is not yet fully completed; the parties are waiting for joint ministerial decisions to implement the legislation.

Initially, the early retirement/voluntary redundancy scheme was expected to attract up to 4,200 employees. After the period for registering to take part in the scheme was extended, the number of applicants rose to 5,450 out of 6,700 eligible employees. Thus, the initial target of 70% participation was exceeded; this was then raised to 75%, and the scheme finally attracted 82% of eligible employees.

This redundancy programme is the largest ever seen on the Greek labour market and follows a series of smaller-scale restructuring plans at OTE. At the beginning of 2005, 628 out of 800 eligible employees participated in an early retirement scheme. A further 900 employees were either due to retire normally at the end of the year or had decided to participate in a smaller early retirement scheme. The company's final predictions were that in this latest restructuring exercise, around 6,350 employees would leave the company. Of these, 714 had left by the end of 2005; a further 4,100 were due to leave by October or November 2006, of whom 3,900 have already left.

It is expected that the total cost of the scheme could be up to €1.6 billion, with an average cost per worker of €250,000, plus an average cash bonus of up to about €45,000. Including the costs of company loans and state subsidies, the total cost may well rise to some €2 billion. The European Commission has yet to examine the plan to decide whether the financing of the retirement scheme, which is based on state aid, contravenes EU competition rules.

The entire early retirement/redundancy scheme has been the subject of intensive collective and political bargaining. Despite criticism by other trade unions and within the GSEE union confederation, the company unions and the OME-OTE federation that negotiated the scheme do not wish to see it abandoned. In this, they are joined by politicians and the employees concerned. Criticism from within the company focuses on questions about why the scheme has not yet been fully implemented and beneficiaries have not yet received the pensions to which they are entitled.

OTE is considering introducing further minor early retirement schemes.

Coca-Cola 3E

In the food and drinks sector, as part of a global restructuring programme, Coca-Cola 3E announced 150 redundancies in January 2006, caused by the relocation of production facilities from Athens to Schimatari (north of Athens) and the dismantling of three regional storage distribution centres on the islands of Rhodes and Corfu and in Mesologi in western Greece.

After the formal announcement of a planned restructuring of the company's European sites, there was speculation that between 250 and 300 jobs might be threatened. Some reports exaggerated this to 700 jobs, accompanied by claims that the company planned "to relocate all production to the Balkans". Subsequently, the issue attracted much media interest, and several strikes and work stoppages took place. Conciliation meetings then took place under the auspices of the employment ministry - such meetings are generally chaired by the deputy employment minister and involve a range of participants, including company union and management representatives as well as government representatives, local members of parliament, other trade union representatives and representatives from the local labour centres, which organise unions at the regional/prefecture level. The newly appointed minister is taking on a more active role in conciliation and consultation meetings on collective redundancies and restructuring than his predecessor.

The agenda is defined by the collective redundancies legislation. "Bargaining" takes place over finding alternatives to dismissals, such as voluntary redundancy schemes or relocation. All decisions involving compulsory redundancies have to be approved by the employment ministry.

In the Coca-Cola case, agreement was reached in two stages. By the end of February, the negotiating partners agreed on 147 out of the proposed 150 redundancies. Of these, 112 workers agreed to participate in a voluntary redundancy scheme, 27 accepted relocation to new jobs with the company and eight continued in employment. Production at the Athens plant ceased on 23 February and the three distribution centres closed on 10 March.

This was not, however, the end of the conflict. It took until the middle of March to reach an agreement on the last three jobs. Eventually, two employees agreed to relocate to the Volos factory, in central Greece and the third decided to join the voluntary redundancy scheme. The end result was that 75.3% of the employees affected decided to take voluntary redundancy.

At the same time as Coca-Cola announced its restructuring plans for Greece, it also announced proposals affecting similar numbers of employees at plants in the UK, France and Belgium. This led to a Europe-wide mobilisation by the European Federation of Trade Unions in the Food, Agriculture and Tourism Sectors (EFFAT) in Paris on 6 February 2006. The situation in Belgium took the longest to resolve; agreement on a social plan was reached in mid-March, providing various alternatives for the affected workers, including early retirement for those above the age of 52, transfers to other sites and a voluntary redundancy scheme with improved severance pay.

Other recent cases

The research highlights several other recent cases of restructuring, some of which have been completed while others are still in progress. Most have come about as the result of bankruptcies, closures and/or the relocation of production. These include Olympic Airways (air transport) and Hellenic shipyards (shipbuilding), both of which are still operating; Naousa (textiles), which is undergoing heavy restructuring; and Yula (glass-making), which has closed its production facilities.

The most recent restructuring agreement concerns workers at the Yula glass-making company in Eleysis, Attica, at the eastern end of the Athens area. It was concluded after conciliation under the auspices of the employment ministry. In total, 181 workers were affected. Of these, 80 will continue to work for the company, while further bargaining on behalf of the remaining 101 workers covered options such as part-time local government work or early retirement. In addition to statutory dismissal payments, the redundant workers will receive a bonus according to their length of service: €3,000 for up to five years' service; €5,000 for 5-10 years; and €8,000 for more than 10 years' service.

Conclusions

The research indicates that restructuring in the Greek labour market takes place within a legal framework that defines content and procedural provisions and in the context of established practices. There are not many effective and efficient cases that may be considered to demonstrate good practice. Restructuring exercises requiring changes in the legal or institutional framework of collective agreements inevitably become high profile, especially when large-scale restructuring is planned.

Even in seemingly clear-cut private sector cases, the introduction of restructuring measures evolves through a pattern of procedures that develop out of a process that is inherently conflictual. This involves formal and informal bargaining, during which the parameters of the restructuring scheme - in terms of its cost and ultimate efficiency - may well change significantly. The lack of effective re-employment policies emerges from the research as an "external' factor, increasing the costs of restructuring for both parties in the labour market.

* "Patterns of company and employment restructuring", by Christos A. Ioannou, Centre of Industrial Relations and Negotiations, Athens University of Economics and Business. This project will be completed by May 2007.