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Sabbaticals Seen as Alternative to Job Cuts

Experts say that by placing employees on extended unpaid leave rather than severing ties with them completely, employers can reduce their payroll costs and keep employees connected to the company and bring them back on board when the economy permits.

January 26, 2009
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Related Topics: Work/Life Balance, Benefit Design and Communication, Compensation
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Sabbaticals can be more than a tool to attract and retain employees. They also can be an alternative to layoffs, experts say.

In today's turbulent economy, a host of employers are cutting their workforces to reduce costs. But when the economy rebounds, many of those employers once again will look to fill out their employee rosters.

Experts say that by placing employees on extended unpaid leave rather than severing ties with them completely, employers can reduce their payroll costs and, at the same time, keep employees connected to the company and bring them back on board when the economy permits.

"From a talent perspective, it's an excellent strategy," says Laurie Bienstock, national director of strategic rewards for Watson Wyatt Worldwide in San Francisco.

When the economy rebounds, the cost of recruiting, retraining and rehiring could outweigh what an employer achieved in cost savings through layoffs, she said.

Carol Sladek, a principal in Hewitt Associates' work/life consulting practice in Lincolnshire, Illinois, agrees.

"It's a longer-term solution than just saying, ‘OK, today we're in trouble. We need to eliminate jobs.' Certainly there are times when that is unavoidable, but this is a good alternative—especially in an economic downturn," she says.

While there always is the risk that employees on extended unpaid leave will find another job, "that's not as easy as it sounds" in today's economy, Sladek says. Employers, however, do need to offer "hooks" for those employees to wait in the wings, such as access to employer-subsidized health care coverage, she says.

Sharon Klun, director of work/life initiatives for Accenture, says that while the New York-based consulting firm has not yet explored it, sabbaticals such as its Future Leave program "could be a tool to help get companies through a bumpy economy."

Under Accenture's leave program, employees can subsidize through payroll deductions up to three months of leave every three years.

"Is this another tool that could be tweaked a little—like could we expand Future Leave to six months or could we expand it in a different way? I don't know. But I think the opportunity is there," Klun says.

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