Interview with Tadeusz Koj, Vice Chairman of PKE Management Board, HR Director.

There it is. It was negotiated by the trade unions and PKE management then signed. Please tell us who the latest Labor Cost Reduction Package is addressed to this time.

It is a slightly modified version of the package which was binding until the end of 2008. It is also a proposal of the employer with regard to employment contract termination as a voluntary decision made by the employee not violating the provisions stipulated in the Social Contract. To be more precise, these are the solutions to be chosen by an employee who wishes to benefit from the package provided the employee has been given the consent to do so – in power plants and combined heat and power plants such consent is given by the plant manager and in the PKE Head Office the consent is given by the Chairman of the Management Board. As a result, there will not be any necessity of hiring a new employee outside of PKE to replace the one who joined the package.

So everybody can benefit from the package?

Not really, as this time the package is addressed to those who are entitled to early-retirement at younger age i.e. not lower than 60 years for women and 65 years in case of men additionally to those employees who have 5 years left before they are entitled to full retirement benefits from the Social Security Fund and also to those employees whose employment period entitles them to retire so minimum 35 years for women and 40 years for men. However, the employment period entitling to retire is compliant with the provisions stipulated in article 5-9, article 10 paragraph 1 and article 11 of the Act of December 17, 1998 on Pensions from the Social Security Fund (Journal of Laws of 2004, no 30 item 353 as amended) and in case of bridging pensions pursuant to article 5-9 and article 11 of the aforementioned Act on Pensions from the National Security Fund.

So this time the package concerns neither the furlough leaves not younger employees…

No, it does not, however there is one loophole in the form of chapter 5 entitled ‘Encouragement for employees of the restructured organization units’. As the title suggests such solutions can only be applied by those who are employed in the restructured units and in each particular case of a furlough leave or termination of the employment contract a separate agreement will be drawn up. To be more precise – there will be separate agreements signed concerning for example employees of the departments which were set up in order to carry out a particular task in a given power plant.

Let’s go back to our Packet – what can people count on?

Above all they can count on one-off compensation the volume of which will calculated against the employment period, salary and the time left before the employee is entitled to the full Social Insurance Fund benefits. Employees terminating their employment contract in accordance with the Package regulations will also receive a severance pay and a long-service bonus (in full amount for those workers who have less than 12 months from the date of the bonus acquisition right in a proportionate amount when the period is longer than 12 months provided that the person worked minimum 24 months from the last long-service bonus paid to him/her).

I think people will be most interested in the compensation volume as well as how this pay will be calculated.

I agree but I should direct you to ‘the payroll people’ if you wish more detailed information. Nonetheless I would like to add that the compensation volume for those entitled to early-retirement for every single year till the comprehensive retirement age (65 years for men and 60 years for women) there is an amount of 1.5 of average monthly wages calculated like the payment in lieu of leave and 1 of average monthly wages in the sector exclusive of profit distribution in the 4th quarter of previous year and for the remaining employees the compensation will amount to, depending on the employee’s income and job seniority, maximum PLN 2,450.00 for each month until the acquisition of full retirement rights.

Will these funds come from the wages fund of every power plant?

No as the compensation will not be paid from the personal wages fund allocated to particular PKE units.

What should be of importance to those who will decide to participate in the Package?

They should remember that a person whose employment contract was terminated within the Package framework and who received appropriate severance pay or compensation cannot be re-employed in Południowy Koncern Energetyczny SA.

How many Południowy Koncern Energetyczny SA employees can be interested in the Labor Cost Reduction Package and do they have to decide upon this matter immediately?

We estimate that circa 200 persons will be interested in the Package and they will have an opportunity to exercise this right until December 31, 2010. The Package binding force time – pursuant to the provisions stipulated in the document – can be extended by the parties for consecutive periods. The decision concerning retirement or early-retirement obviously does not have to be taken at once yet on the other hand the company management should have the knowledge on the possible Packet impact so as to secure the financial means for the due benefits to be paid to the leaving employees.

Andrzej Cygielski