Temporary Layoffs as an Operational Strategy to Compensate for Fluctuations in Labour Demand. An Update

In order to compensate for short-term, seasonal and non-seasonal fluctuations in the demand for labour, many firms terminate employment relationships during periods of lower capacity utilisation and then re-hire the same workers when the order situation improves ("temporary layoff"). They thus pass on personnel costs to unemployment insurance, as many affected workers are registered as unemployed during the interruption of employment and receive benefits from unemployment insurance. This personnel policy strategy has hardly been discussed so far, but has played an important role in Austria for decades. In 2017, 13.7 percent of all new employees were reemployed by the same employer within a period of one year. Registered unemployment during temporary layoffs accounted for more than one eighth of total registered unemployment. It thus accounted for around 1 percentage point of the unemployment rate. The suspension of employment is associated with unemployment insurance costs in the order of 500 million € per year.