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Talent Management Perspectives

Published January 2009

Forced Time Off: What It Means for Talent

  Agatha Gilmore

As the economy continues to struggle, many companies are looking for ways to cut costs. Some are downsizing, others are slashing budgets, and some are forcing workers to take unpaid time off to save money.

According to a recent Associated Press article, the number of workers taking unpaid "furloughs" — also known as temporary layoffs — hit a 17-year high in 2008. In Maryland, for example, 67,000 of the state's 80,000 government workers are being forced to take unpaid vacation time, saving the state an estimated $34 million in the fiscal year, according to the article.

"I've definitely seen companies do it," said Elaine Varelas, managing partner for business development at Keystone Partners, a career management services provider. "This voluntary layoff situation [typically occurs] with mainly junior people: hourly workers, manufacturing workers, truck drivers. The challenge is that the people who are most affected are living paycheck to paycheck, and they're not all that interested in time off."

While these unpaid furloughs, which can last anywhere from one week to three months, represent one solution for financially struggling organizations, they carry with them a series of challenges. Varelas said one such challenge involves logistics.

"If people are not on the payroll, then [forced unpaid vacation] affects their benefits status, their 401(k) status, their health care and any programs that are contributory. If [it's] something that's coming out of your check on a standard basis, then where is that coming from when there's no check? [Also,] the employee becomes eligible for unemployment [benefits]."

 Then, of course, there are the psychological effects of temporary layoffs, both for the employees forced to leave and those allowed to stick around.

"It's a huge fear factor. It really starts people's nervousness at a much more significant degree," Varelas said.

Employees who have been temporarily laid off might begin looking for other jobs, or they may begin to wonder about their careers, she said.

"At the more senior levels, people are going to be much more concerned about, 'What is my long-term future with this company? And are there things going on that I'm not aware of that I should be? Is there deeper meaning to this than just trying to save a little bit of money in the personnel roles?'" she said.

It's up to talent managers to ensure unpaid furloughs go over as smoothly as possible. Varelas suggested talent managers take employees' schedules and preferences into account when the company is undergoing temporary cuts.

"So for example, if you know that you've got a high performer who has children and school vacation week is upon them and things are particularly slow in that person's department, [unpaid time off during that period] might be a great offer," she said. "A huge part of being an exceptional manager is knowing what your people want, what's most important to them."

Talent managers also should encourage frank discussion and try to communicate as clearly as possible with employees to mitigate the emotional and performance fallout — including fear, stress and reduced productivity — that can come with temporary layoffs.     

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