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What do you do when business is down? Tell your employees to take a vacation — an unpaid one. That's how Taiwanese companies are handling the tough economic times as they try to avoid layoffs and retain skilled workers.

One-third of Taiwanese companies are ordering employees to take unpaid leave as the global economic downturn worsens, according to a recent survey by Yes123, a Taiwanese employment website. Especially hard-hit is the Hsinchu Science and Industrial Park, Taiwan's version of Silicon Valley, where more than 90% of the world's notebook computers, motherboards and cable modems, to name a few leading products, are made. It's also where most U.S. companies turn to subcontract manufacturing of their high-tech goods. (See the worst business deals of 2008.)

The park's reliance on the U.S., where consumer demand for electronics is plunging, means companies based there are suffering from unprecedented reductions in orders. Even the world's largest semiconductor foundry, Taiwan Semiconductor Manufacturing Co. (TSMC), recently asked its 20,000 employees to take an extra day off every week for an indefinite period. The forced leave translates into pay cuts of at least 15%. But it avoids pink slips and allows TSMC to hang on to valuable staff. "This is a way that allows us to make the best of a bad situation," says TSMC spokesman Michael Kramer. "I'm not going to say it's a good thing, but there are worse things that could've happened, such as a pay cut with no leave, or layoffs."

Underemployed workers don't necessarily see it that way. Last month, hundreds of them protested forced-leave policies in front of the Council of Labor Affairs in Taipei. Since then, the council, a government agency, has required employers to amend employee contracts to reflect the reduced hours and to guarantee that income stays above minimum wage for workers facing severe cuts.

That won't erase the uneasiness permeating the high-tech park. Some companies are cutting bonuses, which can amount to more than 40% of workers' pay; when reduced work hours are factored in, some employees are suffering pay cuts of up to 50%. And despite efforts to keep staff on payrolls, the number of layoffs at Hsinchu tripled last year, to 4,400, compared with layoffs in 2007. "Everyone's insecure about their future," says a saleswoman at United Microelectronics Corp. (UMC), who requested anonymity. "I came to Hsinchu 10 years ago for the money. Everyone felt this industry was promising, but now we have to be ready for other options." (See pictures of the global financial crisis.)

Some workers, however, say they actually enjoy having more time off. A manager at a Hsinchu company says for many years he worked 13-hour days. (According to the Swiss-based International Institute of Management Development, Taiwanese work some of the longest hours in the world, averaging nearly 44 hours a week.) These days, he leaves the office at 7 p.m. — not 10 p.m., which was his norm — every day to enjoy dinner and quality time with his family. "Our society was way too overproductive," he says. "It was too intense, so it all exploded at this time." Adds one of his colleagues: "As long as your finances are O.K., the extra hours are pretty cool. I can do things I couldn't before, like exercise, get with friends or take out the trash."

But most are worried about keeping their jobs — so much so that some are afraid to leave the office even when supervisors are telling them to scram. A financial administrator for UMC who asked not to be named says her boss still goes to the office every day despite the directive to work a four-day week. "He's afraid working less hours will make it look like his job is too easy — which would make him more dispensable." She says she will probably skip her annual overseas holiday this year out of fear she'll be replaced. "People used to complain about the long work hours," says Hsinchu psychiatrist Dr. Chen Sung-Wei. "Now they fear that forced vacation days are an omen of worse days to come." Hsinchu psychiatrists like Chen say they've seen their patient rolls rise 20% recently because of the strain that workers are suffering.

Chinese New Year is a time to relax with family and spend year-end bonuses. But as the holiday approaches this year, only half of Taiwanese expect to receive any extra cash from their companies. Instead, their employers are telling them to take long vacations. If only they could enjoy them.

See pictures of China's electronic waste village.

See pictures of the recession of 1958.

• Natalie Tso / Hsinchu
• At Hsinchu Science Park, where much of the world's electronics gear is made, companies are scrambling to cut costs without losing skilled employees