Air Malta will shed half its workforce to be able to operate profitably and the government is in discussions to absorb the redundant employees within the public service. What is best for the country? Matthew Xuereb gets expert views on whether redeployment or giving a lump sum payment to laid off workers is the way forward.
Redeploying redundant Air Malta employees within the public service does not make economic or financial sense because it will cost the country more than a simple golden handshake, economist Karm Farrugia believes.
This opinion is not shared by financial analyst John Cassar White who insists the country is better off with more active workers because that is more beneficial to the economy.
The differing opinions follow in the wake of government plans to slash the national airline’s 1,200-strong workforce by half in the hope Air Malta will become economically stable and operate profitably.
Although talks are still under way, the government’s intentions are clear and the unions involved in discussing the company’s restructuring programme have already been informed.
The national carrier experienced severe losses over the past two years and the prospects for this financial year, which ends in March, look bleak.
Late last year, the European Commission gave the government the go-ahead to pump ?52 million in emergency aid into the airline. Approval was given on condition the airline was restructured.
The restructuring plan is at “an advanced stage” and the government has embarked on one-to-one meetings with union representatives to discuss the airline’s future in more detail. Meetings were held with the General Workers’ Union and the unions representing cabin crew, pilots and engineers.
Mr Farrugia believes it “made more economic and financial sense” to give redundant workers a golden handshake and get on with the airline’s restructuring than “absorb them into a public service that does not need them”.
“Redeployment within the public sector takes place every year with workers moved from one government department to another. But here you will be transferring excess baggage from Air Malta to the government. I would much prefer a payout as these workers will probably end up being unproductive and inefficient and cost taxpayers a lot of money,” he said.
Mr Farrugia said that, if redundant employees were redeployed as planned, they would simply be transferring “unutilised workers from one section to another”.
“If there was proof the public sector was yearning for more people, then I would understand it. But our public sector is bulging at the seams. Only hospitals have staff shortages, especially nurses. If redeployed, these people will cost the country more,” he said.
He referred to the payouts to former Malta Shipyards Limited employees when the company was being downsized to be more attractive to possible investors when it was being privatised.
In September 2008, the government had offered lump sum settlements to the shipyard’s 1,627-strong workforce at a cost to public coffers of ?58 million. At the time, the government had offered them a golden handshake or alternative employment with Industrial Projects and Services Ltd. IPSL is a public company that absorbed workers from the restructuring of Malta Drydocks and Malta Shipbuilding prior to EU membership. These workers perform services in the public sector, such as embellishment works for local councils.
“Redeployment is not good economics and not good financing. Economically speaking, it pays more to offer them a payout than a job for life with the public service which does not need them,” Mr Farrugia said.
But Mr Cassar White disag-reed saying redeployment was “definitely better” for the economy.
“Our economy needs more active workers. A good number of the people who will be redundant are in their 40s or early 50s, so it’s going to be practically impossible for them to find a job. Although it would mean a great strain on taxpayers’ money, it makes more sense to redeploy.”
He insisted his argument was purely of an economic nature, although the social aspect should also be taken into account.
Mr Cassar White argued for a skills matching exercise for the abilities of redundant workers to fit the needs of the different departments where they would be redeployed. “We have to maximise their output because the economy needs more people in employment.”
Moreover, he said the government should launch incentives for employers in the private sector to take on former Air Malta workers.