Forced time off: More employers exploring furloughs
TRAVERE CITY – An extra day off from work may sound nice. But what if you didn't get paid for that day off? In a time when many people are living paycheck to paycheck, would you volunteer for unpaid time off if it meant possibly saving your job or a co-worker's?
With the economy the way it is, more and more companies are asking employees to work fewer hours. AlcoTec Wire Corp., a producer of aluminum wire in Traverse City, is one of them.
"Because we see the economic conditions as temporary, and we have a desire to maintain our current work force, we have opted to open up the option of furloughs on a voluntary basis," says Human Resources Director Jennifer Ewing. "To date, we have had enough volunteers to prohibit any necessary forced layoffs of our production personnel."
She also adds, "Everyone has a loved one, friend, or a neighbor that has lost his or her job over the last six months. Most employees are thankful to have a steady job and appreciate the furloughs as an option to avoid permanent job loss."
This is not the first time that AlcoTec has offered voluntary furloughs. Ewing says they also did them in 2002 with great success.
Kate Greene, co-founder and president of Human Resource Partners in Traverse City, says recently she has been talking to many companies about furloughing workers. Under furloughs, employees are ordered to take a certain numbers of days off without pay. This saves the employer from having to pay potentially tens of thousands of dollars in salary, while at the same time avoiding layoffs.
"I have seen shortened workweeks, layoffs, and pay reductions, and often a combination of the three," Greene says. "The first thing to look at is: are these actions really going to make the kind of cost savings impact the company needs?"
However, Greene says, many times, furloughs are not enough.
"Most smaller companies cannot afford to do a furlough or rotating layoffs. Right now we're not sure how long this economic decline will last, so layoffs are usually a better first-round option."
The media industry has been especially hit hard because of a decrease in advertising. A recent study by advertising agency Zenith Optimedia predicts companies will spend $10 billion less on television ads this year. That's a more than 5 percent decrease from last year. The most likely companies to pull their ads are car makers, car dealers, and travel companies, which have seen their sales plummet.
The cutbacks in newspaper and magazine ads are expected to be even more severe. Circulations are down, and several newspapers including the Ann Arbor Times, Rocky Mountain News and Seattle Post-Intelligencer have shut down their presses for good. The Flint Journal, Saginaw News, and Bay City Times, are only publishing three days a week.
The effects are also being felt locally. In January, TV 7&4 laid off nine full-time employees. And starting in March, according to one worker, non-contracted and non-commissioned employees were forced to take one day off a month without pay. Area newspapers and magazines are also forcing workers to take furloughs, ranging from one day off a week, to several days a quarter.
Michigan is not alone when it comes to companies that are reducing employee hours. In a survey done by consulting firm Watson Wyatt, nearly one in 10 employers expects to implement a shortened workweek this year. Another six percent will force mandatory furloughs, and nine percent say they'll have voluntary furloughs.
Not a new concept
For decades, Michigan automakers have been shutting down production for weeks at a time. But what experts say makes this recession different is that salaried and white-collared workers are being affected, many for the first time.
Attorney Rachel Roe, of Smith Haughey Rice & Roegge in Traverse City, specializes in business and employment law. She says in the past few months several businesses have contacted her with questions about mandatory furloughs.
"They want to make sure they are legal – and the answer is, yes," says Roe. "The Fair Labors Standard Act states that we don't care how much or little an employee works, as long as you pay them for that work."
However, Roe warns that because furloughs don't have to be universal throughout a company, owners must be careful selecting which workers will have their hours cut.
"You don't want to target only women or only older workers, or else you could end up with a discrimination suit."
While cutting hours during a time when many people are trying to pinch pennies isn't ideal, Roe says it can benefit both the employer and employee.
"In the long run, companies are trying to save money and save jobs. If a business can't afford to pay their employees, it may be either layoffs or reduced hours. I think in this job market, people will just be happy to have a job and tough it out."
Northwestern Michigan College human resources instructor Mary Ann Linsell agrees. She says in her opinion, workers are willing to share the burden of furloughs and reduced hours if it means their co-workers are able to keep their jobs.
"While there is a lot of anxiety and stress about the economy," she says, "there is also a lot of compassion because most people understand that they could be the next to lose their job."
Still, workers are concerned about how their healthcare, retirement, and other plans will be affected. Linsell says maintaining those benefits should not be a problem as long as the worker remains at full-time status. Human resources consultant Greene adds that all employees should ask tough questions before going on furlough, including whether they will be eligible for unemployment benefits during their time away from the office. BN