Strapped High-tech Companies Moving to Low-cost 4-day Week

It is easier to resume regular, full-time work schedules than it is to replace 20% of the company's workforce, some managers say.

This Sunday, when his friends went to work, Ami (not his real name), an engineer for Applied Materials in Rehovot, loaded his bicycle onto his car and headed for the Jerusalem hills. Since the company announced a shortened four-day work week, Ami has dedicated his forced day off to his hobby that had been limited to weekends up until now.

"In normal conditions I would have been angry," Ami says, "but we recognize the reality. Just two months ago the company laid off 10% of its workforce, and luckily I survived that wave."

Hundreds of employees will have to get used to this new reality at Sapiens, Numonyx and Keter, as well as some hotels and other enterprises. The rationale is obvious: saving 20% of wage costs and operating costs on days when the firm is shut down. For workers, it means a 20% salary cut, and the "disappearance" of vacation days due to them by law, replaced by forced vacation days.

Most top officers believe that the limited operation format will remain in force so long as the company's condition warrants it. What began as a short break for a single quarter could have long-term repercussions.

Applied Materials has chosen to deduct workers' vacation time to avoid affecting monthly salaries and various benefits. But if the company is forced to extend the present configuration it is clear that accumulated vacation days will disappear, and workers' pocketbooks will begin to feel the effects.

For some of the companies, like Sapien and Numonyx, the move was aimed at avoiding layoffs, while for others, such as Keter and Applied Materials, which have laid off hundreds recently, the strategy was adopted after the enterprise chiefs realized that the layoffs were not enough, and sought additional ways to economize.

One manager spoke about the choice between pinpointed layoffs or a horizontal blow to all employees. "We thought about the day after the crisis. It is easier to resume regular, full-time work schedules than it is to replace 20% of the company's workforce," he said.

A shortened work week of four days is not an Israeli invention. Many firms in the U.S. adopted the move in mid-2008.

Last June, Utah became the first state in the U.S. to shorten its work week across most of the public sector, with the aim of saving energy and operating expenses. According to U.S. Department of Labor figures, the number of employers who have moved to a shorted work week due to the financial crisis increased in November 2008 by 72%, to 2.6 million companies, compared with just 1.5 million companies who implemented a 35-hour work week in November 2007. The mayor of Atlanta cut municipal workers' wages and shortened the work week because of budgetary problems, with a fall in tax revenues.

The British newspaper The Independent reports that the British government is considering shortening the work week to three days in an effort to avoid massive layoffs.

But a four-day work week doesn't cut only into salaries and vacation time, but affects other benefits such as advanced study fund deposits. National Insurance deposits and employer-sponsored pension and provident funds are also a derivative of wages (which are 15%-20% lower for four-day work weeks). Accordingly, these deposits will be lower.

Is an employer's decision to shorten the work week in order to reduce employment costs legitimate?

Attorney Hila Porat, a labor law expert, says that a company whose workforce is based on personal contracts is fully entitled to decide to shorten a work week or cut salary benefits.

If a worker does not agree, he or she can resign and will be entitled to redundancy compensation if employed for more than a year. "It's important to remember that if an employer cuts salary benefits and a worker does not quit or file a legal claim, the worker will be considered as having agreed to the changes," she notes.