Citigroup, which is planning to eliminate 52,000 jobs and trim costs next year, dropped a portion of the severance payment offered to employees who have been at the bank for at least a decade.
US employees with experience of 10 years or more and fired after January 15 are losing the ‘supplemental severance payment’ that would add weeks of base pay to their package, according to a memo Monday from Paul McKinnon, the bank’s head of human resources. Shannon Bell, a spokeswoman, declined to say how many workers would be covered by the policy.
Citigroup Chief Executive Officer Vikram Pandit is cutting jobs and reducing costs as loan losses climb and the global economy falters. Last month, the government agreed to pump an additional $20 billion into the bank amid concerns that customers might withdraw deposits after the stock fell below $5 for the first time since 1994.
“They were generous in their traditional severance,” said Steven Gross, global leader of rewards consulting at Mercer Human Resource Consulting in Philadelphia. “Now they are cutting back to more of a common practice.”
Banks and brokerages worldwide have announced more than 190,000 job cuts since the subprime mortgage market’s collapse last year sparked a credit crisis. On November 17, Pandit said he would reduce head count by about 14 per cent to 300,000 in the ‘near term’, from 352,000 employees as of September 30.
Citigroup’s basic severance plan entitles employees to two weeks of base pay for each full year of service to a maximum of 52 weeks of base pay. For employees with 10 or more years at the bank, the plan offered more than two weeks for each year. “We’ve continued to review our policies and practices to ensure that they support our overall business objectives and remain competitive with industry standards,” McKinnon wrote in the memo.
Lehman Brothers Holdings, which filed for bankruptcy in September, told employees that it would cut off some workers severance payments because of the bankruptcy.
Citigroup’s shares fell $1.84, or 22 per cent, to $6.45 at 4:15 pm in New York Stock Exchange composite trading.