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Tech Industry

Tech industry adopts shutdown tactic

Mandatory vacations may be new to technology workers, but other industries have been using similar strategies for years.

While forcing workers to take time off is nothing new for automakers or airplane assemblers, it is a new reality for many in the technology industry.

Looking to meet Wall Street expectations for quarterly earnings and perhaps avoid layoffs down the road, a host of companies have announced programs that either ask or tell workers to take time off, in some cases with pay and in others without compensation.

In particular, a number of companies will basically be closed next week, including Compaq Computer, chip equipment leader Applied Materials, software giant Adobe Systems and programmable chip maker Xilinx. Others, such as Dell Computer, National Semiconductor and Hewlett-Packard, are letting workers choose the days they take off over a given period of time.

Asking or telling workers to take paid vacation helps companies financially because the vacation time workers build up is considered a liability on the balance sheet. Companies that schedule all employees to take time off at a particular time save money on power and other costs.

Such programs, though implemented sporadically in past technology industry slumps, have become common this year as tech companies look to combat a sudden plunge in sales. The tactic is commonplace, though, in more traditional manufacturing jobs, said Bill Coleman, senior vice president of compensation at employee recruitment site

"If you talk to anyone that works at Ford or General Motors, that's just part of their culture," Coleman said. Workers in those industries are so used to the cycle that they plan weddings or other occasions around plant shutdowns, he said.

For companies that have big manufacturing operations, the savings of shutting down during what would be an already slow time can be substantial. Doing a shutdown around the July 4 holiday, which falls on a Wednesday this year, makes even more sense, Coleman said.

"Next week is going to be fairly abysmal as far as general productivity," Coleman said. Many people would have chosen to take at least two days off anyway, he said. "For companies that have manufacturing facilities, in particular, there is a huge cost of being open.

Forcing everyone to take time off or a pay cut also can be perceived as more fair than, say, hiking medical insurance payments or other costs that take the same amount of money from the pockets of lower-paid workers as from executives.

Although such programs are often pitched as ways to avoid layoffs, Coleman said the benefits are often only temporary.

Coleman said he experienced that firsthand while working at broker Charles Schwab some years back, when mandatory time off was followed by layoffs.

"At Schwab, it didn't prevent layoffs," Coleman said. "It might have saved some jobs."

And even though many companies are making the time off voluntary, workers, particularly those on salary, may feel compelled to do whatever is asked of them.

"You're not going to fight city hall if you hope to get promoted next year," Coleman said. "You want to be a team player."

On the other hand, Coleman said workers and companies may get an unanticipated side benefit from extra time off: renewed enthusiasm for the job.

A lot of people have been putting off vacations after seeing their stock portfolios drop and layoffs spread.

"There's a lot of stress in the workplace," Coleman said. "People are worried if they will have a job."