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BoC VRS appeal depends on whether compensation is taxable or not

October 4, 2019 at 9:05am
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The imminent Bank of Cyprus voluntary retirement scheme’s appeal to employees all depends on whether the one-off lump-sum compensation will be taxable or not, according to insiders.

Both the lender as well as the Tax Department keep cards close to their chest, even though talks have taken place and letters were exchanged on this crucial issue, one also said.

Tax Department head Yiannis Tsangaris is believed to have given the green light for compensation not to be taxed but nothing is absolutely certain. The scheme is to be presented to staff today.

In December 2017, the Department drafted legislation providing that the practice of non-taxed compensation the public and wider public sector was enjoying to come to an end. The draft bill also included the banking sector.

But the proposal was put aside because of the imminent February 2018 presidential elections at the time. And it is still in the parliament’s drawer. The scheme is the fourth exit scheme prepared by the bank since the financial crisis of 2013 and its subsequent bail-in by depositors.

The one-off compensation package to be offered to a total of 4,155 employees will not exceed €200,000 and will be calculated based on employees’ earnings and years of service, while their age will also be a factor.

The bank’s latest early retirement plan is expected to be along the lines of the previous one deployed in May 2016, when 450 employees had pressed the ‘exit button’.

If the scheme process goes smoothly and if the Helix project also goes according to plan which also provides that the 108 bank employees working on the non-performing loan package’s transaction are transferred to the buyer, then these two imminent moves will cut down staff by almost 500.

BoC’s aim is to have about 3,650 employees in 2020 so as to rationalise its cost base.

 

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High compensation packages for new BoC redundancies