Companies ask expatriate staff to take unpaid leave

Here's is an interesting article written by Sara Hamdan and Sarmad Khan reported in the National.

Could this trend happen in Korea? We shall see.....

An increasing number of firms are asking expatriate employees to take unpaid leave rather than making them redundant, uncertain of how long and deep the downturn will be in the region.

Dhow Palace, a five-star hotel in the Burj Dubai area, has given a quarter of its staff a one-way ticket home on unpaid leave for three to four months.

“They are mostly junior staff, but by sending them away, we are saving a lot on transportation, food and accommodation,” said Ashwin Singh, the general manager of the hotel.

“It is hard to lose staff, but I would prefer to lose 25 per cent rather than all of them. This is the only solution available to hoteliers.”

Mr Singh said hotel revenues throughout the industry had fallen between 45 and 60 per cent since the final quarter of last year. Occupancy rates since then have dropped about 30 per cent and room rates have declined sharply.

“I’m not worried about the occupancy as much as I am worried about how to increase revenue,” Mr Singh said.

Shahzad Butt, the director of business development at Chelsea Hotels Group, said room rates, in most cases, had fallen back to levels of 1998-1999, forcing hoteliers to send staff back home on involuntary leave to manage costs.

“Sending staff on unpaid leave is a short-term solution to retain human capital,” Mr Butt said.

“Hoteliers don’t want to lose trained staff, but the current financial strain on our pockets dictates that we must let them go for a short while. We know many hotels have sent staff on unpaid leave. We will have to do the same if the crunch persists.”

Staff asked to take unpaid leave are confident the companies value them enough to retain their jobs, and remain optimistic despite having to tighten their belts.

“It helps the company and I get extra time with family back home, so why not?” said a valet attendant at Emirates Towers hotel, part of the Jumeirah Group. “At the end of the day, I still have a job and that’s what matters these days.”

Some companies are encouraging employees to take a sabbatical, in some cases up to a year, as they seek to cut costs and find creative ways to cope with the financial crisis.

“I won’t take too much time off; most are taking about two weeks of unpaid leave,” said another employee at Emirates Towers.

The Jumeirah Group, which employs more than 10,000 people from 90 countries, declined to comment.

Analysts say this measure of managing costs is occurring in Europe as well, as a means to cope with the crisis.

“Some companies find that it is better to give [employees] leave and wait for the economy to recover,” says Kamran Butt, the head of the Middle East equity research team of Credit Suisse. “All in all, we’re seeing this not only in the Middle East, but in Europe as well with car manufacturers; it’s a different way of looking at managing the business.”

Dusit Dubai is another five-star property that does not want to make redundant staff it has trained over the years. “Right now, we are encouraging staff to take voluntary unpaid leave up to a month, in addition to their accumulated annual vacation,” said Michael N Francis, the marketing and communications manager at the hotel.

“It’s better that employees take unpaid leave and relax back home as opposed to sitting here and doing nothing.”

If business did not pick up, he said, sending employees on longer unpaid leave would probably be the only option, because the hotel did not want to terminate staff “it had worked so hard to train”.

Analysts said this approach to cost cutting was being used globally, including by the car makers Honda and Toyota.

“As [companies] brace for a slowdown, they remain uncertain as to how extreme the slowdown will be; [granting unpaid leave] is a way to protect the company in an environment when it’s difficult to forecast how far down the private sector will go,” said John Sfakianakis, the chief economist of the Saudi British Bank, a subsidiary of HSBC.

“This is a kind of ‘wait and see’ approach for companies; they realise that they face less demand by consumers and are forced to reduce output and downsize, so this way they can avoid permanently laying off staff, which is a cost in itself.”

Analysts expect companies across all sectors to consider cost-cutting initiatives such as involuntary sabbaticals in the next few months. “We’ll see this in other sectors, including financial services, because they are all interconnected and there’s an obvious decline in all the sectors,” Mr Sfakianakis said.

The job cuts and sabbaticals will have an effect on prices and general economic growth, he said. Without wages, people will consume less, so demand will decline and overall prices will fall. Remittances will also decline from the high number of expatriate workers in the UAE who send a large proportion of their wages home.