Bank Leumi seeks to include younger employees in its downsizing program. Sources inform "Globes" that while the voluntary redundancy program which the bank announced several weeks ago was targeted at employees over 57, the bank will also allow younger employees to retire with enhanced severance pay amounting to 270% of the legal requirement. Estimates indicate that about 200 out of 700 employees who will be laid off as part of the plan are to be younger employees, who will receive only the increased severance package.
Employees at whom this program is directed recently received an offer to participate. The program includes increased severance pay of 250-270% (depending on employee age), or an early pension, as well as a retirement grant. It is directed at female employees over 57 and male employees over 59. These are mostly first generation employees who are already nearing retirement age and will receive an unfunded pension after retirement.
While Bank Leumi is expected to complete the retirement program by the end of the year, it seeks to accelerate the process by offering a NIS 25,000 grant to participants applying by the end of September. As mentioned, employees under the specified ages can also participate, but will receive only the 270% severance pay.
Most bank retirement programs proposed in recent years were directed at older employees nearing the retirement age. Leumi, by contrast, decided to cut the number of younger employees as well, due to the bank's high number of employees and low efficiency ratio.
During the past decade, Bank Leumi carried out large-scale recruitment of employees. The bank's financial reports show that while the number of employees in 2004 was 8,334 (not including subsidiaries and offices abroad), it leaped to 9,711 in 2008. That is, in 4 years, bank staff increased by 1,380, about 15%. Moreover, a substantial number of the employees recruited during these years were 'quality' employees, with advanced academic degrees, recruited to various succession planning programs and special projects, such as Ofek and Atidim, and they received high managerial salaries.
However, the bank's situation had come to change dramatically, and the recruitment trend gave way to efforts to increase efficiency. This was a result of various factors weighing on the bank's revenue, such as low interest rates, increasing regulation, and decreasing activity abroad due to the entanglement in the tax investigation in the US. This was in addition to the bank's poor efficiency ratio and the unfunded pension paid to first generation employees, which is a significant burden on the bank's capital. Bank Leumi CEO Rakefet Russak-Aminoach has been leading these efforts to increase efficiency, which include a downsizing of more than 1,000 employees, the merging of head office units and the closing of branches. This trend continues with the new downsizing plan, aimed at decreasing the number of employees in the bank by a further 700.
Published by Globes [online], Israel business news - www.globes-online.com - on July 4, 2016
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