Unemployment Prevention- Companies Implementing Unpaid Vacations and Four Day Weeks

By: Money_Morning

Jason Simpkins writes: The U.S. unemployment rate, currently at a level of 6.5%, could rise to 8% next year . But it could also find a ceiling sooner than expected, as more companies implement unpaid vacations and four-day workweeks to preserve jobs.

The U.S. recession may just now be entering full swing, but storm clouds have been gathering for more than a year and many companies have already trimmed payrolls. Now, the goal for many companies is to prepare for an economic rebound by finding ways to keep the their skilled productive labor intact.

" More companies are exploring alternatives to layoffs ," John A. Challenger, chief executive of consulting firm Challenger, Gray & Christmas, told BusinessWeek . "If they can keep people on until the business turns around, the company would be in much better shape to ramp up quickly."

Dell Inc. ( DELL ) employees, for instance, recently received a memo from Chief Executive Officer Michael Dell asking them to take some time off without pay. The company has already met its previously stated goal of cutting employee payrolls by 10%, but the memo said there would be more layoffs unless other cost-cutting measures, like unpaid leave, weren't effective.

Other companies throughout Silicon Valley have joined Dell in elongating the holiday.
Hewlett-Packard Co. ( HPQ ), Cisco Systems Inc. ( CSCO ), Advanced Micro Devices Inc. ( AMD ), Texas Instruments Inc. ( TXN ), Adobe Systems Inc. ( ADBE ) and Computer Sciences Corp. ( CSC ) are among the industry heavyweights to be taking a break, with some closed from today until January 5.

Maria Guidice, owner of San Francisco-based Web design firm Hot Studio Inc. , told the New York Times that when the dot-com bubble burst in 2000 many companies, including hers, immediately slashed payrolls but that tactic was painful and counterproductive.

" In 2000, it was like ‘cut the heads ,'" she told The Times . But things are different this time around.

"Our No. 1 priority is to keep people employed and to do that we're going to bank the money and keep it for when we need it," Guidice added. "I know some people are super bummed, but they understand we're trying to keep the workforce intact."

California's technology giants aren't the only ones pursuing alternative cost-saving measures to save jobs, either. Across the country, in Towanda, PA, Global Tungsten & Powders is encouraging its 1,000 employees to take leave without pay in an effort to preserve manpower, The New York Times reported.

"We have a very skilled and competent workforce and the last thing we want to do is lose them when we're assuming this economy is going to come back," Craig Reider, the company's director of human resources, told The Times in an interview.

The number of U.S. workers who normally work full-time but now clock fewer than 35 hours per week has soared 72% in the past year according to the Bureau of Labor and Statistics. The agency said the number of such employees climbed from 1.49 million in November 2007 to 2.57 million in November 2008.

Pella Corp. , an Iowa-based manufacturer of windows, is instituting a four-day workweek for a third of its 3,900 employees, BusinessWeek reported. 

"Our contention is, consumer confidence will rebound," said Pella Senior Vice President Chris Simpson. "If there's a [government] stimulus package of some kind, we think people are going to respond."

A stimulus package being drummed up by the incoming Obama administration is rumored to cost roughly $800 billion, for instance .

Other companies, like Motorola Inc. ( MOT ), are cutting back salaries, but so far, pay cuts do not seem to be widespread. Labor Department figures indicate the average hourly pay for about 80% of the work force grew by 3.7% last month from November 2007.

John Challenger, of Challenger Gray & Christmas, says that the effort to save jobs is not just a fad, or a case of companies living in denial, but a shift in modern corporate ethos that is not only more humane, but more economical.

"People are measured and ‘metricked' to a much greater degree," he told The Times, "So companies know that when they're cutting an already taut organization, they're leaving big gaps in the workforce."

By Jason Simpkins
Associate Editor

Money Morning/The Money Map Report

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