Dude! You're Getting a Week's Worth of Unpaid Vacation...

Here's a tough one a lot of companies are thinking about.  In tough times for a company, does it make more sense to do layoffs (impacting a few folks dramatically) or force unpaid leave across the ranks to relieve some economic pressure for the company and hope things turn around?

That question came up in my mind as I read this post by John Hollon at Workforce, who notes the voluntary offer of a week's unpaid leave to all Dell employees as reported by the Dallas Morning News.  Hollon also notes the fact that Dell is giving employees a nudge to be a good company citizen and take the unpaid leave, adding  "“although the leave program is voluntary,” the newspaper reported, “the company may resort to layoffs if it cannot save as much as hoped through this round of cutbacks.”

Ugh.  Make that double-ugh.

So, which way do you go?  I'll give you another choice - you need 2% of payroll (about a week's worth) as part of an economic survival plan your company has put together.  Do you:

1. Do a layoff equal to that amount,

2. Offer voluntary unpaid leave and hope enough employees will take you up on it (knowing that layoffs to make up the difference are in your back pocket), or

3. Force voluntary leave on everyone (1 week), causing increased employee relations issue, but making your number until the next drive/need comes along....

You're getting a Dell week's worth of unpaid vacation, dude....

Real SVP of HR stuff during bad times.  Discuss....

Comments

[Chris - Manager's Sandbox]

wow! Great food for thought... Kris, I'm not sure what the right call is here. Sounds like bad PR no matter what you do. I think layoffs are unfortunately better received given that they're so common right now.

If you knew you wouldn't have to force unpaid leaves a second time or have a layoff anyway, the forced unpaid leave may be preferable. It's fascinating how often these issues come up not because the business is unprofitable, but because of a "need" to increase margins to satisfy shareholders, often to the detriment of the employer brand.

[Amy Wilson]

How about a truly voluntary "sabbatical" of up to 5 weeks? That way, a smaller number of employees could make up the bulk of the savings. Or course, this could be a mess on goal management, but could be a nice boost for morale.

[Derek Irvine - Globoforce]

Chris hits on very key point -- the "need" to satisfy shareholders to the company's detriment. I recently blogged on the insights of the CEOs of The Container Store (Kip Tindell) and Whole Foods (John Mackey) who said: “Simultaneously we hit upon the philosophy that I think will be dominant philosophy in business in the 21st century. It’s the principle that the purpose of business is not to maximize shareholder value.”

So what's to replace it -- a focus on the employees that, as is discussed later in the article can drive shareholder value of more than 1,000% -- quite a nice side effect when company leaders seek to serve their employees and not act as slaves to Wall Street. More detail is available here: http://globoforce.blogspot.com/2008/07/happy-employees-1000-shareholder-return.html

[Marsha Keeffer]

There's a middle path after letting go of people. Yes, it's possible to do voluntary unpaid time. Perhaps a solution that will allow for more business consistency and uptime is cutting the workweek to 4 days. It allows for more continuity than having people out for a week. You can keep people on, yet still see your payroll expense drop.

[Alan]

Kris,

I remember we used to shut down for a week or so in the Aerospace Industry back in the days. For most companies, there's not much to do between December 20 and January 1. Schools usually take some time off - why not give mom or dad some time off as well to reconnect with the kids (if you have them) or with each other (if you don't).

Now for the tough part - whether to go unpaid or not. There are two ways to go about this. One is to have everyone go unpaid. This is the worse scenario. It's a tough economic time to go without a week's worth of pay. Maybe you could allow employees to use any stored sick or even vacation time. It doesn't save you anything up front, but it does reduce your accrued liabilities, can save you money on energy and other expenses, and can rejuvenate your workforce. Another way to go would be to split the shifts and make everyone take 2-3 days off without pay. If you need the coverage in your area, you would be reduced to half your staff, but you could get by and save some money at the same time.

There's no real easy answer. The decision maker will have to decide what's best for the company and just go with it. There doesn't seem to be a win-win situation out there. Maybe choosing the lesser evil is the way to go.

[Kim Bailey]

I've not had this happen at any of the places I have worked, but I can see how it might. I would initially think that asking for volunteers to see how many takers you get would be good (assuming you tell them that you are looking for better ways to cut back than layoffs). A real downside is the potential for disengagement, rumors, etc. People tend to feel that if you are asking them to take a week without pay, there are BIG problems and what if you can't make payroll....or have to close...etc, etc.

I would definitely do this or layoff as an absolute last choice because once you do, the rumor mills will start running.

[KD]

Chris/Marsha/Alan/Kim/Derek/Amy -

Great thoughts. Still don't know what I would do if I was faced with this one. Tough, but real for many, stuff....

KD

[Rebecca Mazin]

I say offer the option of unpaid time off. Don't be surprised when people take you up on the offer. See my blog post of November 12th on The HR Answer Blog at www.allbusiness.com; "Would your employees like an extra week off; without pay?"