JSE-listed Telkom and the three labour unions representing the bulk of the telecommunications giant’s employees have reached an agreement that results in a retrenchment and pay freeze that will enable Telkom to embark on a growth phase.

The landmark two-year agreement, effective June 1, comes after a years-long battle with trade unions as Telkom attempted to cut its workforce in a three-year turnaround, group CEO Sipho Maseko told journalists on Tuesday.

Telkom had already trimmed down from 21 000 employees three years ago to 12 500 employees by the end of May through voluntary severance and early retirement packages and outsourcing, Telkom chief administration officer Ian Russell said.

During the past financial year alone, 3 878 employees accepted the voluntary packages and a further 437 employees were affected by outsourcing, reducing employee expenses by 10% by the end of March.

Now, the large-scale workforce reductions had ended, with retrenchments off the table – for at least two years – for the 11 000 unionised employees, represented by the Communications Workers Union (CWU), Solidarity and the South African Communications Union (Sacu).

The deal excluded employees in Telkom subsidiaries, such as newly acquired Business Connexion and Trudon.

With a pay increase freeze in place for one year to April 2017, Telkom set aside some R700-million for performance-based remuneration for both individuals and teams – rewarding employees and teams up to 12% more each month should they meet and exceed set sales and customer service targets.

Employees would then receive a guaranteed 6% pay hike in mid-2017.

The ‘Performance Pays’ initiative, which would replace the previous short-term incentive plan, was aimed at ensuring customer satisfaction and focusing on front-line productivity metrics.

This was an element of the agreement that assisted Telkom in prioritising customers.

“Our turnaround strategy has allowed us to stabilise the business. The next chapter of the Telkom story must be one of growth and growth requires us to be better at attracting and retaining customers,” said Maseko.

Russell said the agreement also committed Telkom to limiting outsourcing to less than 1 000 employees over the next two years, with organised labour committing its full support in the implementation of the incentive plan; providing ongoing support and involvement in creating more flexible working practices and patterns to allow Telkom to more clearly mirror customer needs and unlocking operating model improvements in interactions between unions and the company.

The agreement was welcomed by the Telecommunications and Postal Services Portfolio Committee.

“It is encouraging that, in light of the current conditions, where unemployment is high and the economy is growing at a slow pace, Telkom still manages to maintain financial stability. It is also reassuring to know that the company is committing to increase workers’ salaries by 6% from April 1, 2017,” said committee chairperson Mmamoloko Kubayi in a statement on Tuesday.

“This agreement . . . creates stability, sustainability and a new way of working, which will benefit our employees and our customers,” Maseko added.

Sacu and Solidarity have signed the agreement, with Sacu president Michael Hare and Solidarity communications unit deputy director-general Marius Croucamp welcoming the engagement on Tuesday.

The CWU agreed to the new partnership agreement in principle, but had yet to formally sign it.