Asia tech firms cut costs with forced leave for workers

By Doug Young

TAIPEI (Reuters) - When the global recession began to take a toll on high-tech manufacturers in Taiwan, the factories gave their workers a vacation that many would have just as soon skipped.

Putting workers on forced unpaid leave, often for one or more days a week, is a tactic being adopted around the world as firms seek to cut costs and keep skilled workers on the payroll, even if there is little work to do, so that they will have resources when orders pick up.

"When an economic downturn begins to take hold, employers knee-jerk into making dramatic changes," said Darryl Green, president of Asia Pacific for human resources firm Manpower Inc.

"But there are employers who will stop at nothing to try to retain their valuable workforce. These employers -- often in the manufacturing sector where skills are hard to come by -- consider innovative alternatives such as shorter working weeks and short-term shut-downs."

Employment specialists say the phenomenon is not unique to Taiwan, and is used more broadly by manufacturers in cyclical industries, ranging from electronics makers in South Korea, to car makers in Britain, and manufacturers in Germany.

In Taiwan, the trend of forcing workers to take leave without pay, euphemistically called "unpaid vacation" in Chinese, began in the memory chip sector which experienced its worst-ever slump throughout most of 2008.

From there this cost savings measure has quietly spread to other key sectors such as LCD manufacturing and other chips.

In one of the clearest and most sobering signs of the times, TSMC (2330.TW), the world's biggest contract chipmaker and one of Taiwan's most profitable tech firms, said this month it will roll out its own forced leave without pay system in 2009. TSMC's main rival, UMC (2303.TW), is taking similar measures.

Taiwan makes 70 percent of the world's made-to-order chips which are used in everything from computers to cellphones and MP3 players. TSMC and UMC, which are the biggest players in Taiwan, saw their collective sales plunge 35 percent in November from a year before, with TSMC posting its worst monthly sales in 3- years.

TSMC (TSM.N) laid down the cold reality of its situation to employees in a December 3 letter from CEO Rick Tsai, who said he feared the current economic downturn could last for a "fairly long time."

"The company must do its utmost to lower costs," Tsai wrote. "At the same time, we will also do all we can to protect employees' jobs. Under these circumstances ... manufacturing departments have decided to take a certain amount of unpaid furlough in December ... All other departments will begin to do the same on January 1."

SAVING MONEY

According to an online survey by Taiwan's yes123.com.tw in November, some 22.6 percent of the 3,197 respondents said their companies were using forced unpaid leave to save money.

Among those polled, nearly 15 percent said they were being forced to take one, two or even three days off each week.

One such forced leave day each week typically equates to a loss of anywhere from 15-20 percent of a person's salary. With an average per capita income of about $17,500 and a savings rate of 28.68 percent, the loss of such income is making many Taiwan workers choose between maintaining high savings or cutting their spending, with many opting for the latter.