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Long weekends serve as an alternative to layoffs

Would you like 10 more three-day weekends per year? Would you still take them if the third day was unpaid — and if your alternative was getting laid off?
Image: furloughed workers
The California state government has imposed its first-ever unpaid furlough, requiring employees to take two unpaid days off a month to save money during the fiscal crisis.Nick Ut / AP
/ Source: The Big Money

Would you like 10 more three-day weekends per year?

Would you still take them if the third day was unpaid — and if your alternative was getting laid off?

One of the biggest costs any employer faces is payroll. In the ongoing economic crisis, employers are looking for any way to cut costs, and many are resorting to layoffs. But many others — from RV makers in Oregon to the Gannett newspaper chain to the state government of California — have turned to involuntary furloughs, or unpaid days off, as a way of cutting payroll costs while avoiding painful layoffs.

A forced furlough is better than losing a job, but it leaves already-at-risk employees feeling even more powerless, buffeted about by bosses and balance sheets.

Instead, what if employees facing furlough could actually choose their furlough days? Call it the furlough weekend.

Here's how the plan would work:

  • It would be open to all public- and private-sector, union and non-union employees in the United States, pending approval from their supervisors.
  • Eligible employees would choose either from a menu of furlough options or negotiate the number of furlough days they want for the year against the needs of their employer. Ted the banker wants to take 10 days; his boss decides he can take only six. Or Ted wants only six days, but his boss wants him to take 12. They work it out and schedule the days, allowing the employer to plan ahead for the missed work.
  • Employees would receive no pay for their furlough days, but their benefits — health care, retirement, pension contributions, and so on — would continue uninterrupted. Starting and stopping these benefits multiple times would be like trying to do the same to an aircraft carrier.

Why a three-day weekend? Why not? We're Americans. We love three-day weekends. Some employers have recently begun showing a little flexibility with their furloughs, especially those in the hard-hit media sector. Pearson PLC's Financial Times — which has already cut 80 jobs so far this year — said last month that it will impose furloughs but will give staffers the options of extending annual leave or working a three- or four-day week between June and August.

Richmond, Va.-based Media General also said last month that its employees must take 10 unpaid furlough days by the end of September. But the company's headquarters is leaving it up to the management of its individual properties, such as the Richmond Times-Dispatch, to negotiate with its employees when those days are taken, giving the employee some choice in the matter.

There are historical precedents for such plans, though admittedly not all are encouraging. In England in 1972 and 1974, the government imposed a three-day workweek to save electricity because striking coal miners were grinding the nation to a halt. It's difficult to compare that situation to the current one here because England had no choice — it was literally running out of electricity.

In the 1970s, a pair of California workplace researchers named Barney Olmstead and Suzanne Smith advocated something called V-time, for "voluntary reduced work time," a way to temporarily reduce the hours and pay of full-time workers as a method of avoiding layoffs. It was employed at the county level in California in 1976, becoming the basis for the state's Reduced Work Time Act of 1980. It is, in essence, a voluntary furlough.

What are the benefits of the voluntary furlough or, more specifically, the furlough weekend? Employers could save billions in salary expenses — savings that could prevent layoffs and free up capital for growth or to aid the company's balance sheet. Companies that make layoffs typically see a quick spike in stock price but often suffer longer-term image problems that hurt their value as they begin to be seen as unhealthy.

For workers, there could be numerous benefits. And they wouldn't necessarily have to give up their earning power.

Workers could use their furlough weekends to add a second income. They could turn a hobby into a business or startup and maintain a largely self-perpetuating business, such as property management or any number of online businesses.

A non-economic but nevertheless valuable advantage: Employee benefits include having extra days to get things done — and on a weekday, when businesses are open. Employees who could afford it could spend more time with family and take more weekend getaways.

Perhaps the greatest nontangible benefit, however, would be giving employees a measure of control over their fate. If an employee is laid off or furloughed, the employer sets the terms. The employee feels powerless. The furlough weekend would go a ways toward changing that.

I did a little back-of-the-envelope calculation to estimate the blue-sky cost savings to employers. This admittedly is a gross calculation, but it gives you an idea of the potential savings.

In 2008, the total payroll for all U.S. employees was $6.54 trillion, according to the Department of Commerce's Bureau of Economic Analysis. (That figure includes payroll only, not the employer cost of pensions, health care, and other benefits.)

People are paid to work about 264 days per year.

Let's say you have 10 furlough weekends per year, taking 10 days off, or the equivalent of two workweeks. That means you'd be paid for 254 days per year, a 4 percent reduction.

Now, let's assume each one of the 154 million full-time employees in the United States takes 10 furlough weekends per year. Of course, that can't happen for a number of reasons — some workers are too indispensable, some are paid on contract rather than by an hourly rate, and so on. But let's just say that for argument's sake.

In that case, the total payroll savings in 2008 would have been a whopping $261 billion. Let's say only half of all American workers can or do take the furlough weekends. That reduces our savings to $131 billion, but that figure would rise if more workers could participate.

Is it worth it?

Considering the savings would be spread across all of America's thousands of employers, it would depend. If it would cost an employer more to implement the furlough weekend than it would save, the answer is clearly no.

Otherwise, why not try it?

"I think it's an excellent idea," said Boston College sociology professor and economist Juliet Schor, an expert in work and leisure time and author of "The Overworked American: The Unexpected Decline of Leisure." Schor said she's working on a book that discusses "hours reduction and the possibility of using the time for second-income streams."

To backstop Schor, I called Laura Sejen, global director of compensation for Watson Wyatt, a specialist in employee benefits that helps companies with their payrolls and work forces. I explained the furlough weekend to Sejen and asked, Is the idea totally crazy? After laughing, she said, "Only medium crazy." Sejen points out that offering furloughs in some professions — such as police work — could have unintended harmful consequences, like a rise in crime. "But it could work in a managed kind of way," she said.

Sejen suggested that employers could offer a menu of furlough weekend options. Say, Option A gives the employee the first 10 Fridays of the year off, Option B gives them five Fridays and five Mondays, and so on. "Then, the people in Human Relations and payroll are not looking at a thousand different permutations" as each employee seeks to customize their furlough weekends. Or, as Sejen said: "We're having ice cream. You get to choose vanilla or chocolate, but it's ice cream."

Sejen said that voluntary furloughs, like the furlough weekend, would be preferable to layoffs in one key area: employee morale. Layoffs kill the morale of the remaining employees, she said, and that hurts productivity and brand image.

And more layoffs are coming, Sejen said, if the economic crisis continues and alternatives are not found. In an October survey taken by Watson Wyatt, 45 percent of employers contacted said they had either made layoffs or anticipated them in the next 12 months. In a second survey, taken in December, that number had jumped to 62 percent.

Sejen pointed out that furlough weekends could be inherently unfair to lower-earners. They could work well "if you're an established professional with a nice salary and you're not living from paycheck to paycheck," she said. "But if you're like half of the population who's earning $50,000 or less and is trying to house, feed, and clothe a family of four," losing several days of pay per year might not be an option, she said.

Whereas white-collar employees taking furlough weekends may not need to add a second income, lower-paid furloughed workers almost certainly would. And they may not have access to the resources required to run an online business.

Fair enough. But that brings us back to our original point. Ten days of lost pay per year is still better than getting laid off. In times like these, that's a no-brainer.