THE DEPARTMENT of Finance has warned the nationalised banks not to expect approval for big payoffs on redundancy deals for staff.
The banks were directed to draw up new plans based around pay rates on voluntary redundancy in the public sector and to prepare for a level of job cuts to reflect the sharp reduction in the size of the Irish banking sector.
The heads of human resources at Allied Irish Banks, Anglo Irish Bank and Irish Life and Permanent were called to a meeting at the Department of Finance on Thursday and told to draw up proposals for redundancy pay at or below public sector rates.
The department pointed out that the three banks were now nationalised and should not expect the same level of redundancy pay offered to staff in the past now that they were Government-owned.
The industry norm on severance pay in banking has been about six weeks per year of service plus statutory entitlements.
However, the department told the human resources managers that voluntary redundancy terms at the Health Service Executive involved three weeks’ pay per year of service plus statutory two weeks’ pay.
The announcement of 2,000 job cuts at Allied Irish Banks has been delayed by a failure to reach agreement on redundancy payouts.
There are fears that payment below industry norms may lead to fewer staff accepting voluntary redundancy, forcing AIB to resort to compulsory lay-offs.
At the bank’s half-year results on Monday, executive chairman David Hodgkinson said that agreement with the unions and the Government was “not far off”, and that redundancies could start later this year.
Mr Hodgkinson has warned staff that the bank will slim down into a smaller organisation but he has shelved plans for “big bang” job cuts due to the risks involved.
He has said the 2,000 redundancies would be carried out on a phased basis to the end of 2012.
The Department of Finance and the European Commission must approve any restructuring plan at AIB.
Minister for Finance Michael Noonan has said job losses were “an inevitable but unfortunate consequence of the necessary restructuring of the banking system”.
In reply to a parliamentary question, Mr Noonan said he wanted all parties treated fairly, “mindful of the prevailing challenging economic circumstances facing the banks and the country”.
The Minister said officials at his department were meeting with the banks to discuss an “action plan for employees”.
Unions want AIB to offer six weeks’ plus two weeks’ statutory pay per year of service, in line with what Bank of Ireland – the only Irish bank to avoid State control – has offered 750 staff in its own redundancy plan, but the department is resisting this.
Irish Life and Permanent has offered 5½ weeks’ pay per year of service plus two weeks’ statutory pay to 350 staff and the 200 employees who joined from Irish Nationwide Building Society with the transferred deposits.
Anglo is also preparing a redundancy plan for its own staff and employees transferred in from the remainder of Irish Nationwide.
