In the ongoing negotiations between Telkom and its three unions, the telco has surprised unions by upping its offer from the previous "disgusting" 1.5% to 6% for the next three years, but warns anything higher will spark forced retrenchments.
The ongoing negotiations could be settled as early as Wednesday, when all three unions and Telkom will convene at the Commission for Conciliation, Mediation and Arbitration (CCMA) to continue negotiations.
However, the unknown quantity is the largest union, the Communication Workers Union (CWU), whose members are opposed to the offer, and could reject it, leading to its members going out on a strike. Solidarity expects a mandate back from its members this afternoon, and the South African Communications Union (SACU) says things are looking positive.
The CWU was demanding 11.5%, down from its initial 12%, while SACU asked for 9% and Solidarity wanted 8.8%. Telkom's initial offer was 1%.
Telkom and the unions have been in wage talks since March, going five rounds without being able to reach a settlement. Two years ago, a threatened strike was narrowly averted, when a last-minute offer from Telkom brought five months of salary negotiations to an end. Telkom's current two-year agreement with unions expired at the end of March.
This year, a strike had seemed imminent as the telco was not budging from its previous negotiating position and was contracting back staff that had taken voluntary packages, which unions saw as a slap in the face.
Inflation level
The 6% proposal is contained in an e-mail communication issued by Meshack Dlamini, group executive for employee relations. The mail indicates the offer is for a three-year period, which breaks with Telkom's previous two-year deals.
The increase for each year, valid from April to March of each year is 6%, slightly higher than the current inflation rate of 5.9%.
Reserve Bank governor Gill Marcus, after the bank's monetary policy committee review two weeks ago, warned there were upside risks to inflation moving higher, although inflation is forecast to remain relatively contained. Inflation is expected to average 5.8% this year, and 5.8% next year, before slowing to 5% in 2015, she said.
Dlamini cautions, however, that "anything above the offered 6% will trigger forceful retrenchments as indicated during our discussions". In addition, Telkom says the increase in salary "should be accompanied by a huge improvement in the productivity levels of all employees".
The e-mailed notification says the company will, in the context of the offer, pay special attention to trimming overtime, meeting targets, eliminating sick leave abuse and discontinuing the practice of granting ten additional sick leave days without the involvement of the company doctor. Productivity is also set to improve through suspending vacation leave accrual while staff are on temporary disability.
Dlamini notes that Telkom will not embark on forceful retrenchments but, where warranted by circumstances, offer voluntary packages in areas where business activity is declining and there is obsolete legacy technology that is no longer a viable business opportunity.
In March, Telkom said it was offering voluntary severance and early retirement packages from 15 March to 31 August, before embarking on a retrenchment process, if necessary. The group made the offer in a bid to cut down on staff costs, which are approaching a third of total costs.
Thami Msubo, Telkom's chief of human resources, said at the time there is an "urgent need" for Telkom to address its human capital requirements, which impacts substantially and directly on the company's cost base.
Talking to members
However, while two unions at Telkom may sign the deal, the majority union says the offer is already being rejected by its members across all nine provinces.
CWU spokesman Dennis Morobe says the 6% offer is a "change of heart", but the union still has outstanding issues that are serious, such as the lack of a move to close a wage gap that it says affects its members the most.
In September 2009, a collective agreement was signed between Telkom, SACU and Solidarity on a deal to trim salary discrepancies, which should have been implemented some time ago. Telkom has said it was in talks over implementation with unions.
Now, however, it seems Telkom is leaving this issue up to unions. Telkom's proposal indicates the 6% hike should, at the discretion of organised labour, be used for the purposes of salary increases and to address disparities.
Morobe says the union will take any offer higher than inflation to its members, but even though the move - from 1.5% to 3% and then 6% ? was a surprise, members are already indicating they will not take the deal. CWU is brushing off the retrenchment threat, saying it is a separate issue. "It's neither here nor there."
In addition, the three-year offer is too long and poses a risk in terms of inflation tracking higher, says Morobe. "It's not looking good."
More positive
Marius Croucamp, Solidarity spokesperson, says the union expects to get a mandate back from its members later this afternoon. If tomorrow's meeting does not resolve issues, the CCMA matter will go ahead.
Croucamp says will find it tricky to plan based on a three-year deal as it is difficult to predict what the economy will do, while it is easier to look two years out. He notes the carrot to accept the offer is the guarantee of no forced retrenchments.
Solidarity's members may have an issue with the inflation-level offer as they may be expecting a safety net should inflation push higher, says Croucamp. He queries why so many days were lost negotiating when Telkom could have come in at the 6% level earlier.
The problem Telkom staff have is that there is no clarity in terms of Telkom's future strategic direction, says Croucamp. He says this is needed to build its human resource model and give employees a level of comfort. "That's what we sit with."
Croucamp says Telkom may be looking at a three-year deal because this will provide it with greater clarity in terms of costs for the future.
SACU president Michael Hare says the offer will be presented to members for their consideration, although the union will not tolerate retrenchments as a trade-off for an inflation-linked increase.
Hare says he expects the issue to be wrapped up at the CCMA on Wednesday, although none of the unions will tolerate forced retrenchments. However, he says the CWU is the only union that may reject the deal.
Hare says Telkom's leap in offer could have come about because people had taken voluntary packages and he has heard that around 2 000 packages had been taken.
In addition, Telkom's recently-appointed CEO Sipho Maseko was probably the driving force behind the three-year offer, as it will provide clarity in terms of staff costs ahead, says Hare.
Telkom is not commenting on its change of heart, nor the reason for putting a three-year deal on the table, when its usual offer is for two years. Its only comment is that it "remains committed to its engagement with organised labour in the best interest of its employees".
The telco's annual results will be published on 14 June, when it is expected that its headline earnings per share will be at least 20% lower than last year. In the year to March 2012, it turned over R33.1 billion from continuing operations, and made a R179 million profit, although a loss from discontinued operations wiped this out.
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