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Public companies save 8% of payment costs due to unpaid leave – report

CM 18/04/2021 1

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Public companies have seen an 8% decrease in salary costs due to the unpaid leave system caused by the coronavirus, according to a report by Chen Herzog, head economist at accounting and consulting firm BDO.

The report also points out that there have been significant disparities between different sectors of business. While the hi-tech, food and energy industries saw a 9% pay increase due to growth, the industries most hurt by the crisis were the hotels and markets, as payment cost went down by 11% alongside a 12% decrease in those companies’ total income.Despite having employees on unpaid leave, however, this did not prevent a major hit to companies’ profits, with some having a 23% decrease in profits, and others losing as much as 57%.
According to the writers of the report, this shows that the unpaid leave model was ineffective at what it set out to do. Instead, it created a negative incentive for the hiring of employees and prevented the adjustment of business to this new reality.
It also said that savings the company saw on salaries were offset by the fact that they needed to compete with the possibility of guaranteed pay using benefits and pay raises.
At the end of the report, the company recommends finding a different method of encouraging employment and says the government must invest in different models and infrastructure in order to encourage economic growth. 

Source: Jerusalem Post

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