Employee Separation and Retention in PTCL

Report Submitted by:

Aiman Tufail
Raheel Amjad
Saifullah
Nauman
Mahnoor

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Pakistan Telecommunication Company limited:

Purpose of REPORT
PTCL (Pakistan Tele-communication Company limited) is a mega corporation and a
leading telecommunication services provider in Pakistan The purpose of this report is to
discuss the voluntary separation scheme of Pakistan tele-communication Company
limited which took place in 2007. The objective is to analyze what was the pre-VSS and
post-VSS conditions of PTCL, its causes (What were the root causes which resulted in
voluntary separation scheme of PTCL) and effects (what it resulted in) and discussing
what were pros and cons of taking this strategic step. The report also contains the study
about privatization of PTCL because it was one of the catalyst which led to the happening
of voluntary Separation scheme event of 2007.

PTCL (Pakistan Tele-communication Company limited)

PTCL is the most renowned and famous in the industry of telecommunication. PTCL is
considered as leader of telecom industry of Pakistan. It is considered as leading
communication authority in Pakistan. The services PTCL provides are matchless that’s
why it’s considered as backbone of Pakistan in telecommunication sector. PTCL provide
telephone and internet service to all over the nation. Its network is vast and quick than
other telecommunications. Telenor crops and china mobile limited are also the
competitors in this industry. The corporation manages and operates around 2000
exchanges across the country, they are providing largest fixed-line network in the
Pakistan.
Vision:
TO be leading information and communication technology service provider in the region
by achieving customer’s satisfaction and maximizing shareholders value.
History:
Before independence of Pakistan, this department was under Indian post and telegraph
department. Pakistan Telecommunication Company started in 1947 with posts and

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telegraph department. In1990 decades the economic conditions of Pakistan was changed
and government at that time convert many departments and industry into deregulation
and privatization of many departments. The main object of government was to reduce
burden and make the process more efficient and proper.
At that time Pakistan telephone and telegraph was also converted into Pakistan
Telecommunication Corporation.
In 1994 Pakistan Telecommunication Corporation changed in Pakistan
Telecommunication Company limited and government of Pakistan owned 88%
shareholding and rest of 12% by public. Then ETISALAT got shareholding of PTCL in
2006. In bidding of PTCL, Etisalat was highest bidder for the acquisition of a per-cent
stakes in PTCL.

Privatization
Privatization is the act of transforming a public company into a private company
by giving part of it to private investors. Privatization gives the control of management
and decision making authority to private investor depending on the portion of company
given to him/her.

Privatization of PTCL
Initially, PTCL was publicly-owned company i.e. governmental organization. In 2006
governmental shareholding of the PTCL reduced to 62%, when 26% of shares and
control was sold to Dubai-based Etisalat Telecommunications and the remaining 12% to
the general public under the act of privatization.
Etisalat, as it got the managerial control of PTCL after privatization, hired the services of
an international consultancy firm which recommended to lay-off as many as 30,000
employees of PTCL, saying that doing so would help earning desired profits. Hence the
decision was made for preparing a scheme to get rid of such a large number of PTCL
employees.
Resultantly, in 2007 it sent thousands of employees to home in the name of VSS
(Voluntary Separation Scheme). Before privatization, PTCL assured staff that no
employee would be replaced or retired, and their welfare would be at priority always. But
this did not seem as Etisalat stepped in. After privatization, company intentionally denied
training to its employees and directly offered VSS program.

PTCL’s Voluntary Separation Scheme

In 2006, the management of PTCL was handed over to a private company known as
Etisalat Group which is of the world’s leading telecom group. Etisalat holds the 26%
shares of PTCL which were equivalent to the Rs.155.15 billion while remaining 74%
shares hold by government and the general public.
In 2007, the new management of PTCL decided to offload their old employees who were
not relevant to technology and their skill set, age and education were not aligned with the
company’s current goals and objectives. In order to offload the employees, PTCL
announced the VSS (Voluntary Separation Scheme) or The Golden Handshake Scheme
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to 50,000 employees, which estimated cost around Rs.35 Billion out of which 50% were
paid by the Government as per their contract. This scheme was offered to those
employees who were not older than 58 years and were willing to accept this scheme
within 60 days. PTCL didn’t put any pressure to any employee to accept the scheme. In
the notice the HR department of PTCL said that “Employees will have no pressure from
the management to quit jobs by claiming VSS. It said the decision for claiming VSS will
be purely from employees on their consent.” In the 2008, the offer was accepted by
35,000 employees of PTCL and 30,000 were accepted and 5000 employees were not able
to attain that VSS and those who opt the scheme were paid huge amounts of benefits and
rewards by PTCL.

Benefits of VSS 2007

VSS program does not compelled any employee to leave, but it was on employee’s
discretion whether they wanted to avail or not. But even after many employees availed
the option and left the company, PTCL continued giving them benefits like providing
outplacement services to the employees, where they were helped in their transition to new
career stage, with the help of external sourcing companies. The Financial Advisory
Services were also provided to them for better cash management through external
financial institutes. Besides these benefits, Vocational Trainings were also offered to
them at PTCL’s cost including transition bonus, transition pay, allowance benefits, health
fund and leave encashment etc. In addition to these benefits, employees were topped up
with Early Bird Bonus (PKR 200,000) and Group Bonus (PKR 150,000), fulfilling the
requisite conditions.

VSS Phase-II
In 2012, the management of PTCL once again offered VSS to half of it employees which
were 16,000 employees to again offload the employees and they said that PTCL is

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overstaffed. Vice President of HR said that “VSS is a completely voluntary offer
especially designed to ensure long-term welfare and well-being of our employees and
their families. Employees have a choice to either opt for a very attractive package, or
continue working at PTCL which has always considered its employees as a top priority.”
PTCL also stated that those employees who were not opting this scheme will remain the
employees of the PTCL. This time the offer was given to those who were between 1-17
Grades. It cost the company about 10 billion which was paid by the company. According
to the ptclworkers.com, approximately 6,000 employees accepted this scheme.
In the response the senior executive vice president of HR Mazhar Hussain said that “we Commented [s1]:
achieved all the objectives and goals for which we introduced this second phase of vss.
This phase gave more opportunity to employees to get better future for their families”.
Phase-III
In 2014, the management of PTCL offered 3rd VSS to its employees. Chief Human
Resource Officer PTCL said that, “This Voluntary scheme offered by PTCL is highly
people centric. Being a responsible company, we always consider our employees welfare,
the first and foremost priority”. The scheme was specially designed for the people,
aspiring to shape their future while taking advantages from multiple benefits offered by
the company. This time they reduced the retirement age from 20 to 18 years and were
giving two-year additional benefits. They were giving early bird bonus of Rs.2Lacs and
Group bonus of Rs.1.5Lacs.
Along with these benefits, those employee who were having service up to 20 years were
given the Rs.3 lacs of separation bonus for one time and 2.5 lacs of medical bonus and
housing rent for one year. The total amount was the sum of the Severance Pay,
Separation bonus, Medical Benefits, leave Encashment, Housing Allowance,
Commutation, and Provident Fund.

Root Cause of VSS program

The Etisalat management want to sustain leadership position in the market but due to
change in technology and IT system their current employees cannot meet with their
strategic goals.

Another reason is that Etisalat management thinks the company is over—crowded with
employees which is increasing the expenses of company so there must be reduction I
number of employees.

Analysis of Pros and Cons

One can’t say government took wrong step or right step of VSS, because behind this
step there are advantages and disadvantages as well.

Pros
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  Skilled people got opportunity of jobs:
Due to VSS program, old employees were laid-off and many new employees got job
opportunities to utilize their skills.
 Good Will
When the termination was announced in professional manner followed by a severance
package it created goodwill and the company’s name and image didn’t ruin.

 Consideration of morale:
PTCL could have forcefully down-sized the employees but the cared for employees and
offered a program full of benefits. Through this scheme they have kept their morale to be positive
and this was the reason that employees became willing to leave the company at their own.

Cons

 Inflexible program:
The voluntary separation program is inflexible in sense that it does not care which
one employee is average, good or poor performer and which not. There was no
pick and choose opportunity, but the laid-off each and every employee who opted.
As in case of PTCL, only way to lay off the employees was making categories of
employees according to their performance and then offering VSS accordingly
 There was argument made by management at time of time of VSS, that
technology trend has become tremendously important ,so current employees
have not much ability to cope up with trend .that’s why we are going to layoff .
But the question arises, was VSS the only method to cope-up with the matter??
 Huge Financial Cost:
Huge financial cost for laying down the employees and giving them compensatory
Benefits.

Adverse effects on employees: Sense of job-insecurity, low productivity and

low level of reliability because they were not given trainings and promotions.

Adverse effect on company: PTCL downsized its experienced staff under the scheme,
chose to re-employ some experts and for rehiring it had to bear additional costs of recruiting,
selection and orienting.
Adverse effect on GOP: Government bore more than half of the expenses of
VSS programs and it paid despite having low shareholding in company.

THE END

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