BT chief's £1m bonus enrages union as strike ballot looms

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• Communication Workers Union is pursuing a 5% pay rise
• BT has cut 35,000 jobs over past two years


BT faces a showdown with union leaders after it emerged that chief executive Ian Livingston is set to receive an annual bonus in excess of £1m, three times larger than last year's payout, despite cutting 35,000 jobs over the last two years.

News of the payout, to be announced in BT's annual report on Wednesday, comes as the Communication Workers Union prepares to ballot its members at the company on possible strike action.

"This is blatant double standards," said Andy Kerr, CWU deputy general secretary. "Staff at BT have borne the brunt of the cost savings through redundancies, changes to pensions and a pay freeze. All we're asking for is a fair share of the profits as a pay rise. If it's good enough for the managers it should be good enough for the staff."

The CWU, which started its annual meeting in Bournemouth today , rejected an offer of a 2% pay rise at BT recently, despite having accepted a similarly sized deal at Royal Mail, coupled with a £250 guaranteed bonus and £250 possible additional bonus. The CWU, which is the largest union in BT and counts about 50,000 of the firm's 112,000 staff as members, is holding out for a 5% pay increase.

Members of the second largest union at BT, Prospect, recently voted in favour of a 2% pay increase and a package that includes performance-related pay, to which the CWU is opposed. Prospect has about 30,000 members in BT and nearly 88% voted in favour.

Livingston is set to receive his bonus as a result of the company's dramatic turnaround. The payout is based on financial targets – cashflow and earnings per share – customer satisfaction and environmental and social factors. About 40,000 BT managers will also receive bonuses from BT's improved performance last year.

Two years ago, BT was battling a severe cash squeeze after a series of profit warnings caused by its IT business, BT Global Services, making wildly optimistic profit projections. Faced with the mounting cost of servicing the deficit in its pension fund, the largest private sector scheme in the UK, BT had to slash its dividend payments, sending its share price crashing. As a result, the bonus that Livingston received a year ago – £343,000 – was based solely on improving BT's customer service and green credentials.

Since then, Livingston has orchestrated a turnaround of the business. Its annual results this month showed the firm smashing through its cashflow and earnings forecasts as profits topped £1bn in the year to the end of March. The previous year, writedowns in the value of BT Global Services pushed the firm into a £244m loss. At the start of the year, BT was predicting it would make about £1bn in cash, but it came in at £1.9bn.As a result, Livingston is expected to receive a bumper payout based on the firm's financial success.

Hanif Lalani, former group finance director parachuted into BT GlobalServices by Livingston to sort out the mess, is expected to pocket a year's salary of £574,000 after announcing his intention to leave. Having stopped the rot in the business, Lalani announced in January that he was leaving. He was replaced by Jeff Kelly who has 25 year's experience in the IT business and used to work for EDS. The annual report is also expected to show that The head of BT's retail business, Gavin Patterson, and finance director Tony Chanmugam, who last year got bonuses of £162,000 and £103,000, are likely to share upwards of £800,000 this year. BT declined to comment.

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