Companies look to force staff to take unpaid leave – here’s how to do it

One quarter of Australian businesses are thinking of enforcing unpaid leave or sabbaticals in order to save costs, and avoid staff redundancies, according to a new international survey.

The new figures from consulting company Hay Group’s “Reward in a Downturn” survey of 2000 firms (including 89 in Australia) also shows that more companies are considering job cuts compared with four months ago, when freezing staff levels was preferred.

A large number of firms are now targeting employee arrangements as a method of reducing costs. About 37% are actively looking to decrease staff, while about 24% are looking to reduce costs by eliminating contract staff.

One in four companies are considering forcing unpaid leave or sabbaticals to reduce costs, while many are considering changes to part-time working hours.

Principal of CCI Victoria Legal and SmartCompany legal expert Peter Vitale says employers must be flexible when it comes to negotiating with workers on unpaid leave arrangements.

“Basically, you can’t force an employee to take unpaid leave; it has to be taken with the employee’s consent. But the statute in most states allows employers to direct employees to take long service leave if there’s any accrued by giving a certain period of notice,” he says.

“For people who are entitled to annual leave under the Workplace Relations Act, you can’t force them to take leave unless they have ‘excessive accrual’, which means they have more than eight weeks accrued. In those circumstances, you can direct them to take up to 25% of what they’ve accrued.”

Vitale says employers must ensure an open dialogue with employees, so they understand the motivation of the business in directing employees to take leave.

“Firstly, make sure they understand the message on how the economy and business is travelling. Once you’ve exhausted options in terms of directing people to take paid leave, then it’s a matter of asking for people who are interested in moving to part-time work, including taking extended unpaid leave,” he says.

“The best way of going about it is try and be flexible, and offer your employees a range of options. Call for volunteers and make it clear that this is what you’re trying to do in the interest of preserving jobs.”

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