Invercargill City Council says changes at the Tiwai Point aluminium smelter show the recession has arrived in Southland.
Employment at the smelter near Bluff is under enormous pressure after production was cut by 30%, the price of aluminium plunged and its owner Rio Tinto announced cuts to tens of thousands of jobs worldwide.
Tiwai Point says it has shed at least 20 fulltime positions by offering workers reduced weekly hours and unpaid leave of up to two years.
Invercargill acting mayor Neil Boniface says residents are pleased the smelter is working hard to resist job cuts in a difficult market situation.
Mr Boniface says it is Southland's first real sign of economic recession and the smelter will face difficulties as long as the world price of aluminium remains low.
Union okay with offer
The Engineering, Printing and Manufacturing Union says it agrees with the idea of encouraging employees to take extended unpaid leave if the move averts job losses.
EPMU Southland district organiser Trevor Hobbs says he is surprised the company has been able to avoid job losses until now.
Mr Hobbs says the situation is serious but the move could potentially be good, as a two-year sabbatical might suit the personal circumstances of some people if they knew their job was secure to return to.
He says he would have heard about it if members were concerned, but has not been contacted by anyone.