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18 July 2024

Firms sending staff on unpaid extended leave

By Shuchita Kapur

Companies are sending employees on unpaid extended leave as they seek to rein in their running costs because of the economic slowdown.

"The number of people going on unpaid leave is fairly large and is changing by the day," Panos Manolopoulos, Managing Partner, Middle East Operations, Stanton Chase, said.

"A lot of companies are sending their employees on unpaid leave because of their reduced budgets for 2009. However, the trend may slow as most companies have already accommodated all these in their budgets.

"However, this could change if the economic situation worsens. If that happens, companies will need to revise their budgets again and one of the cost-cutting methods will be to send their staff on unpaid leave."

He said construction, real estate, IT, hospitality and service sectors were affected the most.

Unpaid leave has to be offered to employees as a choice and cannot be imposed on them.

Ian Giulianotti, Associate Director of HRM Consulting at Nadia Recruitment, said: "A lot of companies are giving their employees the option of going on extended unpaid leave.

"An employee can choose to go on extended leave but how long will that leave last? That is the question, as he or she cannot be out of the country for more than six months. All these problems have appeared very quickly but nobody knows how long they will last."

Manolopoulos said: "I am not so sure the current legal system covers unpaid leave but I know that companies can find ways to bypass the rules."

Analysts said even in the current situation many employers would endeavour to retain their employees as they realise their skills are hard to come by.

Manolopoulos said: "Most firms are rethinking their strategies. They either want to retain people or just lay them off." But Giulianotti believes unpaid leave may not be a bad option for both employee and firm if the decision is taken by mutual consent.