Eyeing recovery, firms aim to minimise employee pain

By Mark Potter - Analysis

LONDON (Reuters) - With an eye on an economic recovery, European companies are adopting innovative ways to cut labour costs without losing good employees permanently and even investing in training and bonus schemes to foster loyalty.

Companies are trying a variety of schemes from part-time working and subsidising periods of long-term leave to more drastic calls for staff to work for short periods without pay.

"We are going to see more of this," said Will Gosling, a director in consultancy Deloitte's human capital practice.

"My view is we've some way to go in the cost reduction (cycle) ... but organisations have learnt the lessons from the last recession and recognise that when the upturn comes, they need to have the flexibility to respond quickly."

While firms are still cutting thousands of jobs, they are keen to minimise disputes with unions and keep staff on side.

Telecoms group BT (BT.L), one of Britain's biggest private sector employers with about 106,000 staff, is offering workers 25 percent of salary if they take up to a year off, and a one-off sum of 1,000 pounds as an incentive for going part-time.

The group, which is also aiming to reduce permanent and contract staff by 15,000 in the year to March 2010, wants to retain key employees and avoid a scramble to recruit when the economy recovers.

Similar schemes at accountants KPMG and Spanish bank BBVA (BBVA.MC) have proved popular with staff, and some employment groups think they are helping to limit job losses.

"I definitely think they (unemployment figures) would have been higher if it hadn't been for employees being more flexible and employers looking into that," said Lewis Campbell, a spokesman for lobby group Keep Britain Working.

The number of Britons claiming jobless benefit rose 39,300 in May, less than the 60,000 increase forecast by analysts and raising doubts over predictions that unemployment will climb to over 3 million this recession from 2.26 million.

REACHING A COMPROMISE

Most companies, however, can't afford one-off payments to encourage staff to reduce working hours and their need to reduce costs is putting strain on labour relations.

Keep Britain Working surveys found that just 2 percent of staff have been offered semi-paid sabbaticals, while 54 percent said they had experienced a cut in pay, a reduction in hours or a loss of benefits since the recession began.

Job cuts are putting relations between employees and management under severe strain, for example in France, which has seen a wave of "bossnappings" where workers have detained managers in protest against job losses.

And at a time when staff are likely to find it harder to get a new job, some employers have taken a heavy-handed approach.