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Fury at BT as Barrault gets £1.6m golden handshake

Pay rises cancelled this year for employees with staff still reeling after 15,000 job cuts announced

BT executives will not receive bonuses this year for financial performance after missing all its targets, but the group revealed that the executive who oversaw the division that pulled the business into a full-year loss received a £1.6m pay-off after he quit.

The UK telecommunications giant yesterday published its annual report for the year until the end of March. The document revealed that it had cancelled all pay rises, and that most of the bonuses had been cut as well.

It said: "There are no pay rises this year resulting from the annual pay review. This applies to all BT staff including executive directors. A previously announced pay rise for executive directors, as agreed and announced last year, has also been shelved."

While some directors will receive bonuses for customer service performance as well as environmental and social targets, no bonuses will be paid for the telecoms group's dismal financial performance. "All financial targets, based on free cash-flow and earnings per share were missed," it said.

BT said in the report that it is to pay François Barrault £2.8m after he resigned in October last year following the first of several profit warnings at the group's Global Services division. Mr Barrault's termination payment totalled £1.6m, which was equivalent to a full-year's salary and benefits.

BT announced earlier this month that it had swung to a loss of £134m in the 12 months to the end of March, after a profit of £1.9bn the previous year.

The losses were brought on by problems at BT Global Services, the division that provides and operates technology services for multinational corporations. It was forced to write down £1.6bn after reviewing all its contracts, and added that restructuring the division would cost close to £700m over three years.

BT said yesterday it had no choice but to pay Mr Barrault the full £2.8m. The sum covered his salary for the year as well as the termination payment, but did not include a bonus. A spokesman for the group said: "We are disappointed to make the payment to François but BT honours its legal and contractual obligations."

The Communications Workers Union was furious at the decision to pay Mr Barrault. Its deputy general secretary Andy Kerr said: "François Barrault's pay-off is outrageous. He is being rewarded for failure. This gives the wrong signal to staff at a time when they are being asked to make significant changes to the way they work."

BT staff are still reeling after hearing that 15,000 jobs would be cut from the group this year. This follows 15,000 cut last year, although the majority of those were outside contract workers.

Its chief executive Ian Livingston will receive a bonus of £343,000, a fifth of the potential payment he would have received if the group had hit targets. He plans to convert the bonus into BT shares and will not receive a pay rise this year. Mr Livingston apologised to shareholders at the annual results, saying it has been a "difficult year".

Hanif Lalani, the former chief financial officer, who took over as chief executive of Global Services, asked not to be considered for a bonus.

The report added: "Plans, announced last year, to increase the target and maximum level of future executive director bonus payments have been shelved." It added some discretionary payments will be made to some staff below board level. BT has this year changed the rules governing its executive share plan, which will allow it to reclaim unvested awards. This clawback will be used "if it becomes apparent that there was a misjudgement on which the award was made".