Established in 1927 in Cyprus, KEO is a public limited company and is currently the island's largest beverage supplier, as well as a leading trade exporter in Europe, the Middle East, the United States and Canada. The main shareholder of the company is the established Church of Cyprus.
By its own admission, over the last few years the company has been experiencing serious financial difficulties. These have been attributed to a number of factors, including:
- the global financial crisis;
- long-lasting mismanagement, which led to a significant increase in hiring, in contrast to the company's real needs, and a resultant increase in expenses;
- increased financial damages over a long period, which were not confronted adequately by management;
- payment of extremely high benefits towards all employees;
- an increase in competition; and
- a reduction in tourism, one of the most advantageous factors in favour of the local provider.
In order to overcome these serious financial problems and ensure its survival, KEO decided to proceed with the implementation of the following measures:
- the dismissal of 150 out of the 450 total employees;
- the payment of amounts prescribed by law and the relevant collective agreement only, without any extra compensation;
- the harmonisation of the measures implemented with any future collective agreement; and
- a general reduction in all future benefits towards all employees.
The employees strongly objected to these measures by declaring strikes and demanded the following amendments to the proposed policy:
- a reduction in the number of dismissals;
- the implementation of subjective criteria in order to decide which employees would be made redundant and the consideration of their personal, family and financial life as a whole;
- an exit plan programme;
- an increase in payable compensation, based on the former service of each employee within the company; and
- non-interference of any of the measures adopted with the establishment of any future collective agreement.
After numerous consultations and much bargaining, final measures were agreed between the company, the employees' representatives and the competent authority (the minister of labour and social insurances) and will now be implemented. The measures are as follows:
- the dismissal of 120 employees in total;
- the payment of additional compensation for each completed working year of each dismissed employee (total payable compensation amounting to approximately €3 million);
- renewal of the existing collective agreement for a period of three years;
- a salary freeze for all employees until 2012;
- suspension of 13th and 14th-month salaries (ie, Christmas and Easter annual bonuses) for all employees;
- reduction of company contributions towards the employees' health fund from 2% to 1%; and
- reinstatement of all employee benefits (to those in existence before the crisis) on January 1 2015.
This case serves as an important reminder that unilateral changes to working conditions are extremely problematic and that employers should implement measures early and progressively.
For further information on this topic please contact George Z Georgiou at George Z Georgiou & Associates LLC by telephone (+357 22 763 340), fax (+357 22 763 343) or email ([email protected]).