Staff fury forces Vodafone into U-turn on cutbacks

Anger from British staff at Vodafone, the London Stock Exchange's fourth- biggest company, has forced the telecom giant's UK management into an embarrassing climb-down over plans to scrap bonuses.

Just weeks after the group posted pre-tax profit for the year to the end of March of £4.1bn, Vodafone is paying its UK staff bonuses equal to 2 per cent of their basic salaries. It is not known the total amount this will cost the company.

In March, Guy Laurence, Vodafone's UK chief executive, infuriated the company's 10,000 British staff by telling them bonuses would be scrapped, irrespective of performance, and salaries frozen. But in a confidential memo sent to staff last Thursday, Mr Laurence told them that he had "some good news which I know you'll be interested in.

"Over the past few months I've seen some changes in our company which are really good signs," he said. "There's now a general acceptance that we are in a turnaround situation and that this requires change. There's no doubt that people are starting to take this seriously and taking action. Having discussed this at length with my management team we feel it is important to recognise the work that went into last year ... therefore we have decided to make a one-off bonus payment of 2 per cent of your average basic salary."

Vodafone's staff will receive the payment in June. Mr Laurence added: "So let me be clear about why this happened. We need to implement a lot of change to turn around our company, and because we see people embracing that, we are giving you a reward that says well done and thank you for the work you did last year."

A Vodafone insider said: "Staff morale plummeted when management said it was scrapping bonuses in March. Common sense has prevailed because although profits were down they still came in at more than £4bn for the year."

In March, one month after the company had axed 500 jobs, Mr Laurence said in a letter to staff: "If we had agreed to a salary rise it would have forced us to increase the number of redundancies in the recent announcement."

On top of a salary freeze and the scrapping of bonuses, Mr Laurence said that staff at the company would have to use their existing company cars for longer.