An employee walks past washer-dryers at a Currys shop in London, UK.

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

“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 organizations have learnt the lessons from the last recession and recognize 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 minimize disputes with unions and keep staff on side.

Telecoms group BT, 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 (US$1,619) 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 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 benefits 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 three 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 labor 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.

German carmaker BMW recently stuck about 7,000 flyers to windscreens of non-BMWs in staff car parks asking employees why they were driving competitor models.

The key to reaching compromises is to maintain a dialogue with staff and for management to make sacrifices as well, said Gerwyn Davies, a public policy adviser at the Chartered Institute of Personnel and Development (CIPD), who said this had been happening since the start of the recession at small firms.

“In small companies, there is solidarity. There’s that feeling we’re all in it together,” he said.

Larger firms are now following their lead.

British Airways said last month that nearly 7,000 staff had agreed to voluntary pay cuts, equivalent to 17 percent of its workforce. Chief Executive Willie Walsh has promised to work for nothing in July.

CIPD’s Davies believes such deals will become more common.

“I think the next step we’ll see is public sector organizations having to look at such schemes because in the next couple of years they will be under an equal amount of pressure to trim their wage bills,” he said.

Maintaining morale

Employers are keen to encourage flexibility among staff.

The Confederation of British Industry this week proposed an “Alternative To Redundancy” plan under which staff could be laid off for up to six months, but would receive twice the rate of the government’s Job Seekers Allowance.

Half of the sum would be paid for by the employer which would later decide whether to take the employee back on or not.

Trade unions oppose this, instead promoting wage subsidies as a way of keeping staff in work.

However, they are open to talks on flexible working.

“When companies are in trouble, unions are willing to negotiate and will use all possible means to avoid compulsory redundancies,” said Rob Holdsworth, a spokesman at the Trades Union Congress.

While bearing down on costs, some companies are still investing in staff, believing that by boosting morale they will improve customer service and emerge stronger from the recession.

Electrical goods retailer DSG International has put over 20,000 staff at its British chains Currys and PC World through a training program despite suffering a 78 percent plunge in annual profits.

Home improvements chain B&Q last week announced a monthly bonus scheme for its 30,000 shop workers, with payouts of around 60 pounds for staff in teams that hit targets.

“It’s good for morale – unbelievable in fact. Our store made bonus for each of the three months of the trial,” said Brenda Holloway, a telephonist at a B&Q store in Southampton.

“I bought a special pair of red shoes and spent the rest on a lovely day out with my three grandchildren.”

Source: Reuters