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Tech Industry

SAP mandates vacations to cut costs

The German business-software maker is closing its U.S. research and development unit for longer than usual this holiday season to compel employees to use up vacation time.

German business-software company SAP is closing its U.S. research and development unit for longer than usual this holiday season to save money by compelling employees to use up accrued vacation time.

SAP will close the Palo Alto, Calif.-based unit from Dec. 20 to Jan. 6--the week of Christmas and the week of New Year's--requiring about 1,000 employees there to use seven days of their annual allotment of vacation time to cover the entire period, SAP spokesman Bill Wohl said.

"We expect the savings for the company will come from employees using vacation time we know they already have," said Wohl, rather than from compulsory nonpaid time off for employees without vacation days accrued.

Unused employee vacation time shows up as a liability on corporate balance sheets, so companies can improve their financial picture by forcing workers to use the balance of their time off. The cost-cutting tactic, used earlier this year by Hewlett-Packard, software maker Manugistics and Sun Microsystems, has become popular in the information technology industry over the last two years as a way to counteract the effects of a stalled economy.

SAP has been on a cost-cutting mission this year. An executive from SAP recently told the German newspaper Frankfurter Allgemeine Zeitung that the company aims to eventually increase profits above this year's goal of a 21 percent operating margin in order to ensure its viability as an independent company. SAP exceeded earnings forecasts for the third quarter, ended in September, but retracted its revenue projections for the year, citing uncertain economic and political conditions.

Wohl said this is the first time in at least several years that SAP has mandated use of vacation time.

SAP, headquartered in Walldorf, Germany, has more than 28,000 employees around the world.