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Mandatory vacations

Published 9:00 pm Sunday, September 23, 2001

Associated Press

NEW YORK – Employees at DiamondCluster International knew business was bad when senior executives agreed to a 15 percent salary cut and CEO Mel Bergstein said he would slice his own pay to zero.

But when the Chicago consulting firm told rank-and-file employees they’d have to swallow some of the bitter medicine, too, it administered it in novel form – by furloughing 200 workers for six months with partial pay and mandating two weeks of unpaid vacation for everyone else.

“We were faced with a question of how we were going to reduce our costs and, of course, laying off people is always an alternative,” said Bruce Quade, DiamondCluster’s top personnel executive. “But … from a business standpoint, we believe the economy will come back.”

The moves by DiamondCluster put it in league with a growing number of companies announcing forced vacations and leaves, both mandated and voluntary, often as part of broader attempts to trim costs.

The moves began early this year with firms like discount broker Charles Schwab, which told workers to stay home for three Fridays.

With the economy continuing to gasp, some firms have broadened the policies and extended them into the fall. Many of those companies also have announced broad layoffs but say forced vacations, leaves and related moves help forestall further job cuts and help them keep workers who were expensive to recruit.

“When the market turns up again and the factories are loading orders one more time, we’re going to need everybody we can get,” said Jeff Hahn, a spokesman for Motorola’s semiconductor division.

Forced time-off policies vary by company:

  • At Motorola Semiconductor, which cut 4,000 jobs early this year, employees were told to take a week off in each of the first three quarters of this year. The Austin, Texas-based division is considering a similar move in the fourth quarter, which starts Oct. 1. Workers can draw on their vacation days, but those without enough holidays in reserve must take the days without pay.

    The move was combined with an offer to all workers of unpaid leave for the summer with full benefits and a guarantee that jobs would be waiting when they returned. Workers were also offered the choice of switching to part-time schedules.

  • Tektronix Inc. of Beaverton, Ore., shut down for six consecutive Fridays this summer, as well as the entire week around the Fourth of July. Workers were told to use 10 of their vacation days to cover the time, but those without enough earned time off were urged to “borrow” against future vacation days.

    The company has also frozen pay and top executives have taken 10 percent pay cuts.

  • Hewlett-Packard announced a “voluntary payroll savings program,” asking workers to take a 10 percent pay cut, eight days of paid leave by Oct. 31 or a combination of the two. The decision was left up to workers, the company says, but 80,000 signed up, saving the company about $130 million. The computer maker has also cut 6,000 jobs this year.

  • When energy costs soared and copper prices softened, mining giant Phelps-Dodge Corp. scaled back operations at mines in New Mexico and Arizona through a combination of layoffs and by requiring workers to take all their earned vacation time. Employees who remained on the job were rescheduled to night shifts, when energy costs were lower.

    Such moves coincide with aggressive layoffs across most industries. But forced vacations reflect a corporate reluctance to cut too far, said Ken Goldstein with The Conference Board, a private research group.

    “Companies are a little bit shy about pulling the trigger on some layoffs because they think there’s a good chance those folks won’t be (available) 6 or 12 or 18 months down the road,” Goldstein said.

    Employers say most workers accept the reasoning behind the time-off policies, and that many are enthusiastic.

    They point to people like Karen Mappin, one of 600 Motorola employees who took part of the summer off without pay. Mappin took August off from her job as a departmental manager at a chip plant in Austin, rented a Winnebago and traveled 4,000 miles to the East Coast and back with her dog, Hunter.

    “I didn’t have an alarm clock. I didn’t have an agenda. I didn’t have to be somewhere at a certain time,” Mappin said of the tradeoff she made for $4,000 in vacation costs and four weeks of lost pay. “That, for me, was really refreshing.”

    A co-worker, Rick Kaven, used nine weeks off under the same program to complete home projects, train for a triathlon and other pursuits. Kaven said some employees were uncertain about the program, feeling that taking a leave might undermine their job status. But the arrangement made sense for him and for the company, he said.

    “We probably saved a few people from getting laid off and that’s a good idea,” he said.

    DiamondCluster’s Quade said he knows not everybody is content with the approach. Some workers, sent home for the six months at 35 percent pay with a chance for 35 percent in restricted stock when they return, undoubtedly would have preferred to be laid off since that would’ve meant a larger severance check, he said.

    “There’s probably a mixed bag of feelings out there,” he said.

    Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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