Bank of Ireland has cleared the way for a sweeping restructuring designed to cut costs by €120 million each year over the next four years.

Under the terms of a deal reached with the main banking union, some 2,100 Bank of Ireland staff will leave their jobs across the group in a voluntary programme.

Employees who choose to remain with the group will do so under improved conditions, including a doubling in profit share rates and a shorter working week.

The bank said yesterday that it had accepted the recommendations of Labour Relations Commission chief executive Kieran Mulvey on its "strategic transformation programme".

The bank has been negotiating with its main union, the Irish Bank Officials' Association (IBOA), under the chairmanship of Mr Mulvey for the past six weeks.

Bank of Ireland described Mr Mulvey's 10-point restructuring plan as "fair and balanced", saying it would allow for the implementation of its plans to cut costs.

The bank's chief executive, Brian Goggin, said that the financial services industry was changing and Bank of Ireland was fortunate to be able to embrace that change from a "position of strength".

Under Mr Mulvey's recommendations, staff choosing redundancy in the Republic will be paid eight weeks' pay per year of service, including two weeks of statutory redundancy, up to a cap of two-and-a-half years' pay.

In Britain and North Ireland, the package will include four weeks' pay plus statutory redundancy, with the cap again set at 2½ years' pay.

Mr Mulvey's recommendations also include an early retirement programme, with 210 places to be reserved for staff from unaffected areas who want to leave the bank for personal reasons.

Bank of Ireland staff who remain at work will see their working week reduced to 35 hours under the recommendations.

At the moment, Bank of Ireland's branch staff work an average of 36.5 hours each week. The change will not affect bank opening hours and will not have an impact on staff.

The remaining employees will also see a significant improvement in their financial situation, with their profit share to be doubled from 3 per cent to 6 per cent for each year between now and 2009.

Bank of Ireland has not yet outlined the full detail of the job cuts, but they are expected to be phased in over the next few years. A number of reduction targets will be achieved through outsourcing.

The area to be hit hardest is retail banking in the Republic, where 670 jobs will go. Almost 540 of these will be cut from the branch network and from operations, with the remainder spread across business banking, wealth management and other areas.

Just under 500 jobs will be lost in credit service consolidation in North Ireland and Britain, with a further 279 to go in the same operational area in the Republic.

Some 440 employees will go in human resources and learning, with two-thirds of these to come from outsourcing.

A further 400 jobs will be cut in contact centres, with half of these to go in the Republic and the remainder in Britain and the North.

In situations where Bank of Ireland wants to implement outsourcing, salaries and other conditions are to be protected, with affected staff to get a goodwill payment of €500 per year of service with a minimum of €5,000.

The IBOA yesterday welcomed Mr Mulvey's recommendations, saying that they applied agreeable terms. The union's general secretary, Larry Broderick, was particularly positive on the increased profit share.

Shares in Bank of Ireland fell by six cent to €12.89 yesterday.