BBVA finds way around stiff labour laws
The market’s response to strict European labour laws designed to protect employees has produced an unexpected effect.
In Spain, desperate times produce desperate measures.
Spanish bank BBVA is offering to pay long-term employees almost a third of their salary to go away for up to five years. This is one of a number of options offered to its near 30,000 workforce in an attempt to contain costs.
BBVA is also offering the opportunity of a shorter working week on reduced pay or extra unpaid time off for staff. For those who take a break, the bank is undertaking to preserve the post for the employee’s return.
Laying off permanent staff in Spain is expensive — employees are entitled to up to 45 days salary for every year they have worked for a company — and many of BBVA’s employees have been there long enough to qualify for up to three years pay if they were made redundant.
BBVA’s approach not only saves the bank money, but keeps people out of Spain’s increasingly long queues of jobless.
Unemployment reached 4 million in the first quarter, with the unemployment rate hitting 18.1 percent in April and a rate of well above 20 percent is widely predicted.
Madrid’s Socialist government is grappling with the collapse of its once-booming construction sector and the straight-jacket imposed on its industry by a stronger euro.
So Prime Minister Jose Luis Rodriguez Zapatero — who has staunchly resisted politically unpalatable calls to make it easier for companies to hire and fire — should encourage other companies to follow BBVA’s example.
What the offer also shows is that even those Spanish banks which have so far escaped the worst of the economic downturn such as BBVA and larger rival Santander
The collapse of the Spanish real estate market has yet to be fully felt among the banks, although it has already resulted in the demise of one of Spain’s many cajas — Spanish savings banks — and several major property companies.
Spain’s banks need to brace themselves for a prolonged downturn, so more cost cutting is inevitable. It’s less than 10 years since staff at a central Madrid branch of Santander used typewriter and carbon paper. Today the cost/income ratios of Santander and BBVA are among the best in Europe.
BBVA has copied the carmakers approach to the problem, where temporary plant closures and shortened working weeks are now commonplace. It’s likely to catch on in other industries too.
— At the time of publication Alexander Smith did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. —
(Editing by David Evans)