New, ground-breaking pay system for employees subject to collective agreements comes into force on 1 July 2001 - Performance-based component is enlarged - A common collective agreement will soon apply to employees in both eastern and western Germany - Transition from 40-year-old pay system now complete Deutsche Telekom plans to orient the pay of its some 68 000 employees subject to collective agreements more strongly to market requirements. By introducing a new evaluation and pay system - (NBBS), which will come into force on 1 July 2001, the company will complete the phaseout of its old pay system, which was based on civil-service regulations. In future, employees' pay will be based solely on employees' positions and will no longer reflect criteria such as age, marital status or seniority. The NBBS will also enlarge the performance-based component of employee pay. Furthermore, a single collective agreement will apply throughout all of Germany, in the same manner and with the same terms. Division into "west" and "east" pay-scale areas will become a thing of the past.
"The new evaluation and pay system creates a market-based, performance-oriented compensation system for our employees that is tailored to the needs of a service enterprise in the tough, highly competitive environment of the telecommunications market", explained Dr. Heinz Klinkhammer, Member of the Board of Management in charge of Human Resources. "We are actively phasing out the existing pay system, which had developed over decades and was based on civil-service regulations. From now on, each employee will be paid solely on the basis of his or her function and individual performance."
By introducing the NBBS, Deutsche Telekom is meeting three important strategic aims: The new system is oriented much more closely to the market than the old system was - it brings pay in line with modern standards. It provides the elements that both employees and applicants expect a pay system to provide, and it delivers pay at standard industry levels. This will play a significant role in fostering employee loyalty and in attracting new, high-quality personnel to the company.
Market orientation also means differentiating between sales and non-sales functions. Both the basic system itself and its various payment tables will feature such differentiation. Basic pay in sales areas will be reduced to permit introduction of a higher variable pay component. Sales areas will have a total of four different pay groups, while other areas will have a total of eight. In addition, each of these two basic categories will receive two special pay groups that will reflect elements of employment relationships outside of collective bargaining agreements (such as fixed annual pay, results-based pay, special agreements on working time).
The new system will make payment of employees subject to collective agreements more performance-oriented. This will mean that the variable component of an employee's monthly or annual pay will play a more significant role. In future, each employee will be able, via his or her individual performance and the success of his or her work team, to exert even greater influence on the amount of his or her pay. The company's collective bargaining in 2000 anticipated the NBBS by introducing a performance pay component, i.e. a variable, performance-based pay component, for all employees. As of 1 July 2001, the existing performance-based component of 2.15 percent of total pay will be increased to 6 percent. Our goal is to increase the share of performance-related pay to 10 percent in the upcoming collective bargaining rounds. Results-based pay that depends on the achievement of individual or team goals as well as on the success of the company is initially planned only for the special pay groups. Later, the results-based pay component will gradually supplant the performance component.
In general, the change to the new pay system will not place Deutsche Telekom's employees at any direct disadvantage. In cases in which an employee would receive lower pay through assignment to a certain pay group, special compensatory bonuses will be provided. Such bonuses will be subject to an ongoing phaseout process agreed in collective bargaining. For example, promotions of employees to higher groups will offset, in full, such bonuses; general raises and variable payment components will partially offset the bonuses. As a result, the bonuses will decrease over time and will eventually be completely eliminated.
In the next few weeks, Deutsche Telekom will assign all employees subject to collective agreements to their new pay groups, using a procedure agreed with the social partners. For all Deutsche Telekom employees subject to collective agreements the first payday under the new system will be 16 July 2001.