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September 05, 2003
Using Sabbaticals to Prevent Layoffs

By LISA HIGGINS
Contributing Editor, Best Practices in Compensation & Benefits

For a Limited Time receive a FREE Compensation Special Report on the "Top 100 FLSA Q&As," designed to provide you with an examination of the federal FLSA Overtime Regulations in Q&A format, including valuable tips for FLSA Coverage, Salary Level, and Deductions from Pay. Download Now

When hard times hit and people are buying less and less of what you’re selling, you have to cut costs. You might start with the easy things, but eventually, you’re forced to consider layoffs. As margins–and the head count–get smaller, the remaining employees take on more and more work. They get burned out and production drops or quality slips. When the economy improves, you find that the employees you laid off have gone elsewhere, so you have to hire and train people.

Depressing? Yes. The only answer? No.

There is one cost-cutting strategy that could actually benefit everyone. The effective use of sabbaticals can mean fewer layoffs. Employees who take them usually want some time off. They can use the time to sharpen their skills, and employees returning from sabbaticals are refreshed, with new focus and new ideas.

Charles Schwab & Co., Inc. takes advantage of all these benefits. Sarah Bulgatz, a company spokesperson, says sabbaticals are a way to reward hard work and recognize employees’ outside interests. "We offer eligible employees the opportunity to take up to four weeks of paid sabbatical at each five-year mark of their career," she says. "The benefit is designed to recognize employees’ contributions and encourage them to balance on-the-job efforts with personal needs. Employees get to step away from daily job responsibilities and return to work with a new perspective and sense of creativity." The company allows employees to add their vacation time to the sabbatical, making for a longer break, Bulgatz continues. "Up to two weeks of accrued vacation can be added to the sabbatical, for a total of six weeks off, at full salary."

When used as a way to avoid layoffs, sabbaticals are often longer in duration. According to a white paper published by the Society for Human Resource Management called The Downsizing Dilemma: A Manager’s Toolkit for Avoiding Layoffs, sabbaticals of up to one year are effective as a means of temporary staff reduction. Companies often continue to provide benefits for employees on voluntary sabbatical, as well as partial pay, according to the report. The pay schedule might be 50 percent pay for a three-month leave, 40 percent pay for a six-month leave, 30 percent pay for a leave of nine months, or 20 percent pay for a 12-month leave. "Some HR professionals argue," says SHRM’s white paper, "that 12-month sabbaticals remove the employee from the company for too long, causing outdated skills and a longer learning curve upon return from leave."

Some companies use sabbaticals as learning opportunities: junior staff can learn the next job on their own career path, and the employee on leave may use the time to further their own education. Of course, the company benefits from both.

Communicate program’s goals. If your company implements a cost-cutting strategy that includes sabbaticals, communication is critical. SHRM’s white paper advises HR departments to "clearly communicate the underlying purpose" of the plan, plainly stating that they are "trying to avoid layoffs by implementing intensified cost-reduction methods. This will ensure employee buy-in and loyalty."

One of the obvious benefits of using a sabbatical program during hard economic times is that, in contrast with layoffs, employees actually come back when the sabbatical ends. The cost of training new employees is very high, and the person returning from a sabbatical requires minimal training to get "back up to speed." Ironically, though, the number of companies offering sabbaticals is actually lower during hard times than during the good times. SHRM’s white paper reports that, during the economic growth of 1996, 33 percent of employers offered sabbaticals. In 2001, when the economy tumbled, just 19 percent of employers did the same.

Consider allowing employees on sabbatical the freedom to work elsewhere, as long as they don’t work for a competitor. Also consider continuing tuition reimbursement, so employees can increase their job-related skills. However you structure your sabbatical program, you may find that it allows the company to ride out an economic downturn, returning employees to their jobs with fresh ideas and renewed enthusiasm.

Other points to consider. To avoid any misconceptions and make the process successful, follow these tips:

  • Get managers on board. Managers should hold meetings to select applicants for sabbaticals and coordinate department workflow when members are absent.

  • Be consistent in the way all leave time is implemented. Set parameters for sabbaticals and stick to them.

  • Don’t call sabbaticals a 'benefit,' call them a 'program.' Otherwise, employees will automatically put a cash value on the leave time. Also, if it’s called a benefit, in the event of layoffs or a shutdown, it may become a point of contention.

  • Encourage other times than summer. Everyone wants sabbaticals in the summer, but encourage their use in winter when the staffing is more consistent.

  • Recognize the employees who take on the extra work. Consider a monetary or time-off reward for the employees who cover for the colleagues during sabbaticals.

  • Don’t use sabbaticals as early retirement or phase-outs. This defeats their whole purpose.
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