12° Nicosia,
24 May, 2024

As 2023 ends, banks and unions lock horns on pay structures

Unions and banks at odds over performance-based pay amidst profitable yet uncertain times

Panayiotis Rougalas

Panayiotis Rougalas

The banks and bank employees' unions are at odds over labor issues and the signing of new collective agreements. As we approach the end of 2023, no significant progress has been made in renewing collective agreements during the outgoing year. On the contrary, work stoppages have occurred in banks, as witnessed recently at Hellenic Bank. The two parties are deadlocked, with banks seeking to tie costs to performance, while unions want annual increases to continue regardless of the banks' performance.

The unions, acknowledging the gains made by banks from mid-2022 to the present, are requesting more benefits for their members. However, banks stand firm, acting as if the substantial gains they are currently enjoying are transient and cannot be the basis for signed agreements under current economic conditions.

The primary message the banks aim to convey is that accepting some cost linkage to the organization's performance doesn't automatically mean employees have to "lose." Bank sources suggest an alternative approach, proposing a fixed increment of 1%, with the remaining 3% tied to the performance of the employee or the profitability of the organization. However, the distance between the two sides remains significant.

Banks argue that linking increases to the profitability of the institutions would be preferable without altering the structure of annual increments. According to them, this would cover the extra costs and prevent increases in case of losses or unsatisfactory profits. So far, there's no indication of such an agreement on the horizon, as 2023 has not been constructive for labor discussions.

The goal moving forward is to find a solution to the banks' labor issues and sign new collective agreements, considering that 2024 is expected to be a pivotal year for banking. While banks continue to post profits, the European Central Bank (ECB) is anticipated to start cutting interest rates in the middle of the year, leading to a decline in profits. Additionally, 2024 is expected to witness significant changes in the banking sector, particularly with Hellenic being absorbed by Eurobank.

The banking environment is currently in a state of confusion, with profits being recorded despite a decline in lending. The ongoing digital transformation requires substantial financial resources, set against a backdrop of an anticipated global economic slowdown. Banks face challenges in sustaining promised increases in the coming years.

The unions rightly demand more for 2023, considering the substantial profits banks have recorded. If profits continue, a fair approach would involve continuing to reward employees. However, there is no collective agreement in sight, and negotiations are complicated by the broader economic context.

Since the beginning of 2023, the Cyprus Banks Association has received the unions' demands regarding the renewal of the Collective Agreement for the years 2023-2025. The demands include a 2% increase in basic salaries for each year (2023, 2024, 2025) and the restoration of wage and benefit reductions made during the 2013 crisis period. The unions also propose a 4-day working week and appropriate utilization of technology, representation of workers on every bank board, an additional monthly salary (14th) at Easter, and various allowances for working conditions.

As negotiations continue, the banking sector faces uncertainty, balancing profits, and the need for cost containment in the face of evolving economic conditions. The outcome of these negotiations will likely have significant implications for the banking industry in the coming years.

[This article was translated from its Greek original and rephrased for conciseness]

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