Bank of Ireland not planning pay cuts to meet Government cost-reduction target
Focus will be on addressing costs of pension scheme and voluntary severance
Bank of Ireland’s employee renumeration bill will be reduced through a voluntary severence programme.
Instead the bank is focusing its efforts on resolving its €1.2 billion deficit in its pension scheme. This could involve staff having to accept reduced benefits and/or increasing their contributions to the scheme from the current level of 2.5 per cent.
Bank of Ireland has already begun “engagement” with staff on the pensions issue. This comes just two years after agreeing a number of significant changes to the scheme with employees.
The bank’s employee remuneration bill will also be reduced through a voluntary severance programme that is currently available to staff.
Bank of Ireland has declined to state how many staff it expects to leave under the current scheme but 1,200 departed in the second half of 2012. This brought to 5,000 the number of staff who have left the bank since 2008, and left its headcount at 12,000 at the end of December. It has set aside €57 million for extra redundancies in 2013.
The Government’s direction followed the publication last week of a Mercer review on bankers’ pay.
The State owns more than 99 per cent of AIB and PTSB but just 15 per cent of Bank of Ireland, giving the Richie Boucher-led institution more leeway with the Government than the other two banks.
Senior managers and employees were briefed last week about the implications for staff from the Mercer report.
The Irish Times has learned that staff were told that pay cuts are not being planned. Workers at Bank of Ireland have not received pay increases since 2008, and it is understood that management feels a reduction in pay is not merited, especially in the context of staff taking on additional duties from colleagues who have availed of redundancy.
The Mercer report showed that Bank of Ireland’s total remuneration costs – excluding businesses or units that have been sold – reduced by 23 per cent to €821 million between 2008 and 2012.
The Government is now seeking for it to reduce its employee overheads by between €49 million and €82 million.
Separately, Katrina Strecker, head of group credit operations (GCO), has decided to leave the bank. This change has prompted Bank of Ireland to review the structure of GCO within its group manufacturing unit to ensure the “continued streamlining of activities, while also seeking to realign elements of the GCO structure in line with our overall customer arrears strategy”. As a result, GCO will report to Vincent Brennan as part of group operations and payments.
Simon Mullen has been appointed head of GCO reporting to Mr Brennan.