The International Labour Organization is warning of a looming financial squeeze that could trigger substantial workforce reductions unless major contributors settle overdue payments, including a significant backlog from the United States, according to Reuters. An internal 35-page draft memo shared with employees by Director-General Gilbert Houngbo and reviewed by Reuters says the agency is grappling with what it describes as a "critical" funding situation.
According to the document, arrears from member governments add up to over 260 million Swiss francs, roughly one-third of the ILO’s two-year core budget. "With arrears from several Member States totalling over 260 million Swiss francs ($323.34 million) -- about a third of the biennial assessment -- the cash flow situation has become critical," it states. The U.S., the largest single contributor responsible for 22% of the ILO’s regular financing, has yet to pay more than 173 million francs. Other countries, including Germany and China, are also late on payments.
The financial strain has already led to staff reductions. Some 225 roles were eliminated earlier this year across Geneva and field offices following reduced U.S. funding under former President Donald Trump. The ILO employs about 3,500 people worldwide and works with governments, employers, and labor organizations to promote international labor standards.
In a statement sent to Reuters, ILO management acknowledged the problem, noting the agency, like many U.N. bodies, is confronting "a challenging financial and liquidity situation due to delayed assessed contributions" which has hit cash flow. The statement stressed: "As the Director-General has underlined, every effort is being made to avoid involuntary staff terminations, but this scenario cannot be entirely ruled out if the financial situation does not stabilise."
Two possible directions are laid out in the draft. The more drastic option anticipates reducing spending by 20% during 2026–27, which could mean abolishing as many as 295 jobs, or around 8% of total posts, alongside potential downgrading of positions to save an estimated $93.2 million. A less severe path proposes relocating selected teams to cut costs. Up to 72 roles in research, administration, and communication could be shifted out of Geneva. Moving 50 posts to the ILO’s Turin training facility would generate about $6 million in savings over two years, while transferring responsibilities for Arab States from Beirut to Doha and relocating some Europe and Central Asia-related positions to Budapest are also under review. One proposal even suggests vacating two floors at the Geneva headquarters to rent out space, which could bring in $5.4 million in the same period.
The internal document also warns reserves could cover salaries only through the end of 2025 if current hiring and travel freezes continue. Regular contributions "slowed in September to the point where programme needs could no longer be fully funded."
Not everyone inside the agency is comfortable with the draft plan. The Staff Union passed a resolution expressing "profound concern" over the financial "crisis" and the proposed measures, accusing senior leadership of failing to engage in "good faith social dialogue."
These developments unfold separately from U.N. Secretary-General Antonio Guterres' initiative to trim the United Nations’ core spending by 15%. The ILO’s own $930 million budget for 2026–27 was already approved this June, before the latest payment delays intensified.
The U.S. mission did not provide an immediate comment when contacted, reported Reuters.
With inputs from Reuters
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