Hongkong Telecom faces a showdown with unions after announcing next year's bonus will be tied to profits. The company pledged not to cut wages or sack staff for at least 13 months and said this year's bonus was safe. But unions said plans for next year, under which there will be no bonus if profits rise less than three per cent, amounted to a pay reduction. The unions were considering industrial action last night after an emergency meeting. Ip Kwok-fun, chairman of the Hong Kong Telephone Co Ltd Staff Association, said gross profits were unlikely to rise further. 'The year-end bonus is about eight per cent of pay. The plan is effectively a wage cut, only it takes longer,' he said. Financial analysts said operating profit was likely to shrink in 1998-99 after rising 8.5 per cent in 1997-98 and 10 per cent in 1996-97. The new deal, which includes share options for workers, follows the suspension of a proposed 10 per cent across-the-board pay cut in September. In a statement following two months of negotiations, the company said: 'Hongkong Telecom pledges a 13-month guarantee of no salary reduction and no forced redundancy, as part of a proposed package to transform the company's cost structure.' Staff will get half-a-month's basic salary in bonuses if operating profits grow by three to five per cent, a one-month bonus if they are greater than five per cent, and 1.5 months for 12 per cent growth or more. There will be no change for the 1,500 staff members who earn $10,000 or less. 'It's a win-win situation,' said director of human resources William Cheung Kam-hung. Subject to approval by the stock exchange, share options will be issued, with a value equivalent to 10 per cent of annual salary. The 1,500 workers exempted from the bonus scheme will be given options to purchase 400 shares. The options cannot be used until 2001 so staff who leave before will not be able to take up the offer. There is no deadline for staff over the plan. Cheng Chun-man, chairman of Hongkong Telecom Employees Unions, said the exemption of 1,500 staff aimed to undermine staff solidarity and objections to the plan. 'The bonus would be linked to overall performance rather than individual performance. Morale will be hit because there is no point in working harder yourself,' he said. Lai Man-wai, co-ordinator of the Joint Staff Council, the only union recognised by the telecom giant, said it did not oppose the plan in principle. 'There is no mention of a basic salary cut, which worried people a great deal before as it affects the calculation of severance. This plan is do-able.'