Temporary Lay-off and Subsequent Rehiring of Workers After Short Unemployment. An Update

In order to compensate short-run fluctuations in labour demand, many firms temporarily lay off workers when facing a decline in product demand and rehire them later when demand for labour rises again. They shift part of their labour costs to social security, since many of the laid-off workers receive unemployment insurance benefits during lay-off. This flexibilisation strategy has hardly been addressed so far, but has played a significant role in Austria for decades. Recalls within a time span of a year – after a temporary lay-off with unemployment – accounted for 13.7 percent of all employment take-ups in 2017. Temporary lay-off unemployment accounted for more than one-eighth of the total amount of registered and was responsible for around 1 percentage point of the unemployment rate. The associated costs for unemployment insurance are between 400 and 500 million € per year.