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Magyar Telekom announces 400 headcount reduction

Hungarian telecommunications service provider Magyar Telekom said Wednesday it had reached an agreement with trade unions on the wage development, a 400-employee headcount reduction and decrease in additional employee allowances at the parent company for 2010. The agreement will reduce total workforce related costs by more than 5% over two years.

MTelekom said the agreement also envisaged a gradual reduction of surplus severance payments, paid out under the Collective Agreement to the third of the current level in the period of 2011-2014.

In line with the agreement, MTelekom has created an annual bonus budget equivalent to a 1.5% wage rise for 2010.

Headcount will be reduced by 400 employees, with further reductions coming from the employment termination of executives and employees retiring.

Total severance expenses related to the headcount reduction will reach around HUF 7 billion. The majority of these expenses will be booked in the fourth quarter of 2009, with the rest accounted in 2010. MTelekom will announce the exact number and expenses of the headcount reduction at the end of the year after the detailed plan has been formulated.

As a result of the current agreement, MTelekom plans to reduce Total Workforce Management (TWM) related costs by HUF 6.5 billion compared to the 2008 level excluding severance expenses, which represents a reduction of more than 5% over the two-year period. (In 2008 TWM costs without severance expenses reached HUF 121 billion at the parent company and the Hungarian subsidiaries.)

The planned savings reflect the results of the TWM system introduced in 2009. The company announcement noted that, thanks to the more efficient resource management and headcount reduction, personnel costs are decreasing despite annual wage increases (5.6% in 2009 and 1.5% in 2010).

Magyar Telekom introduced the Total Workforce Management system from the beginning of 2009 in order to focus more on the total labor cost than solely on headcount number and employee-related expenses. The system enables the company to manage combined human resource-related expenses more efficiently and flexibly, including contracted or rented employees as well as outsourcing and entrepreneurial contracts. (MTI-ECONEWS)