Telefonica (TEF.MC) is about to pay an average of 380,000 euros for each employee taking early retirement. The layoff plan, struck on Wednesday, will affect more than 3,400 staff and cost the Spanish telecoms group 1.3 billion euros. It had been flagged last year as part of a three-year strategic plan to cut costs, as well as capital spending, and adjust to the telecoms industry’s new realities.
The plan itself may seem on the costly side, but it will more than pay for itself if, as the Spanish group forecasts, it helps Telefonica save some 285 million euros a year from 2025. Once capitalised and taxed at the average Spanish corporate tax rate of 25%, the savings amount to more than 2.1 billion euros – an 800 million euro boost to the company’s bottom line once the layoffs’ costs are deducted.
What’s more, the overall cost of the latest layoff plan is significantly lower than what Telefonica paid a little over two years ago to reduce staff. An agreement to cut some 2,700 jobs was said at the time to cost 1.5 billion euros – or 555,000 euros per worker. For Telefonica, the cost of a laid-off employee has declined by 32% in two years. Instead of phoning it in, Spanish unions could have pushed for a better deal this time. (By Pierre Briancon)
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