SENIOR managers in the Cyprus Telecommunications Authority (Cyta) are still being allowed to bump up their pension package by taking “early retirement” following a last-minute promotion between six and twelve months before their scheduled retirement, a former Cyta employee has revealed.
“Why allow someone who is due to retire in six months to take early retirement, with an automatic promotion beforehand to bump up his leaving package?,” Yiannis (real name withheld by request) told the Mail.
At a time when the state budget is being stretched by reduced tax revenues, “which after all, belong to all of us”, it is still a common occurrence for senior managers around 55 years old – the official retirement age is 60 – to consider how best to use to their advantage company rules that were put in place in 1982.
Given the long years of service and high salaries involved at this stage, “this is where the big game is being played”, Yiannis said.
He added that new employees would find it hard to rack up the same retirement deal, as young people spend time studying and then typically wait two years before being appointed to a state job.
Yiannis said that the early exit is most often planned for the final year of service, and usually involves a promotion to a higher grade – rather than a simple pay increase – in order to inflate the basis on which the compensation package and monthly pension payments will be calculated.
He said that this mechanism is also used to encourage people to leave who might otherwise be in the way of others’ path to promotion.
“There are also those who are basically useless, where it is a sound decision to move them out early and make room for new blood”, he added.
Cyta’s early retirement package is made up of three components: tax-free compensation for lost earnings, which is calculated using a formula based on years of service, the future period not being served, and salary according to grade plus the state Cost of Living Allowance (CoLA); a tax-free lump sum amounting to one-third of the total pension entitlement; and a monthly pension payment based on the remaining two-thirds of the pension entitlement.
Although in 2002 the semi-governmental organisation put a cap on the maximum compensation allowed – 85 per cent of the difference between the salary the employee would have received on retirement and the pension they will get until then – the 1982 rule is still being applied, reportedly using money from a special fund.
This practice has survived despite repeated criticism by Auditor General Chrystalla Yiorkadji, who in her report to the House Oversight Committee on Tuesday said that such compensation would only be justified if the employee who retired under these conditions not only has no positive contribution to make but their presence also causes financial damage to the organisation.
“I have been saying this for ten years in my reports, but it seems there is consent in order to increase pension benefits,” Yiorkadji said.
She added that the retirement compensation paid by Cyta in 2008 ranged from €19,530 to €173,469 with an average of €108,714 per employee. That means 14 employees received €1.52 million. Seven hundred employees have retired early since 1982, taking home some €35 million.
