"Please take vacation so we can cut costs"

[Demon-Xanth]

How does this help a company cut short term costs except purely on paper (or preceeding layoffs)?

The company I work for recently asked us to use up some vacation time by the end of the year and Intel just asked some people to do the same. But to me it's costing money since vacation time is like money that hasn't been spent yet but a worker using it is the company spending money for no production. To save costs shouldn't a company ask people NOT to take vacation to increase revenue since the amount of the paychecks will not change?

 

[Ameesh]

Originally posted by: Demon-Xanth
How does this help a company cut short term costs except purely on paper (or preceeding layoffs)?

The company I work for recently asked us to use up some vacation time by the end of the year and Intel just asked some people to do the same. But to me it's costing money since vacation time is like money that hasn't been spent yet but a worker using it is the company spending money for no production. To save costs shouldn't a company ask people NOT to take vacation to increase revenue since the amount of the paychecks will not change?

(its confused me too)

 

[HappyPuppy]

The company budgets the vacation money at the beginning of the year. It is money already spent, on paper. You going on vacation doesn't cost them anything that hasn't already been budgeted for. If you don't take vacation, the vacation money is already spent plus they have to pay you for the time you work. Hope that's clearer than mud.

 

[optoman]

Vacation time is a debt to the company. The more vacation time the company has waiting to be used, the more it will have to pay out. Lets say that you make 52K a year and don't use any of your vacation. At the end of the year you quit your job and company has to pay you the two weeks of vacation you have. Suddenly the 52K a year job just cost the company 54K. This only works if they let you carry over your vacation holidays.

 

[Ime]

Say the person was a line worker. They pay the work $20/hr to make a widget that sells for $1. The line worker makes 30 widgets an hour.

Now, let's say the price of widgets plummets to $0.50 each. Suddenly it costs the company more money to pay the worker to produce than it would to pay the worker to stay home.

I could be totally off base, but I thought I'd take a stab at it.

 

[Michael]

Optoman was pretty much correct.

Companies accrue vacation cost as employees earn it. So their expense is the salary paid (plus benefits + employer taxes) plus a vacation accrual. When the employee takes the vacation there is no salary expense as the vacation pay is matched against the accrual that is already on the books.

Over time, it all evens out as employees either take their vacation or employees cannot accrue any more when they hit a limit. You can have short-term "cost savings" by encouraging employees to take vacation now instead of later.

Michael

 

[fastz28]

We have furloughs instead. :|

 

[Hamburgerpimp]

Hell, my job is a vacation.

 

[DaveSimmons]

For companies with physical products there are also cost savings from shutting down assembly operations (where they must pay for the parts) and burning off existing inventory instead.

If a company has two week's worth of Widgets sitting in warehouses then making workers take a week off saves the company the cost of one week's worth of parts and frees up warehouse space (which can mean even more savings if they're paying for third-party storage). They've reduced their safety margin against assembly problems, but the short-term savings make it attractive.

 

[Pastore]

yuck, i come back from accounting and bam, there is my homework on ATOT

 

[nord1899]

Another thing is that they could ask everyone to take vacation time at the same time. This way they can shutdown the office.

I mean they are already paying you, regardless of whether you are at the office or not. They will save money by not having to pay for the resources to run the office at full capacity/speed, ie. eletricity, supplies, etc...