Deutsche Telekom and the German workers union Ver.di finally reached an agreement on Wednesday afternoon, calling an end to industrial action.

The agreement was struck after the German incumbent was criticised over plans to outsource 50,000 staff to three new companies, proposing new contracts including lower wages and longer working hours.

Under the agreement reached Wednesday, weekly working hours will be extended from 34 to 38 hours without a salary increase. Measures taken to make working hours more flexible to improve service include making Saturday a regular working day.

Salaries are also being cut by 6.5 per cent to a more competitive level, although the reduction is being cushioned “step by step in a socially conscious manner” over a period of 42 months. Deutsche Telekom initially moved for cuts of 9 per cent.

Compensatory payments will be 100 per cent in the first 18 months, 66 per cent for the next twelve months, and 33 per cent for the subsequent twelve months. Compensatory payments will cease on December 31, 2010.

Furthermore, protection against outsourcing was agreed until the end of 2010, with protection against redundancy until the end of 2012.

“This protection against redundancy for more than five years gives our employees a high level of security,” said Deutsche Telekom’s chief human resources officer and labour director, Thomas Sattelberger.

“If Ver.di’s members agree to the compromise we will generate more competitive cost structures, promote service culture in the company, and therefore safeguard service jobs in the long term,” Sattelberger added.

The cuts will allow Deutsche Telekom to save hundreds of millions of euros, putting the carrier well within its target range for planned savings of Eur0.5bn to Eur0.9bn in 2010.