Mr Tang is understood to have been meeting executives of big firms to appeal to them to avoid cutting staff. He also met Vincent Cheng Hoi-chuen, chairman of HSBC's AsiaPacific operations, on Monday.

'There is no across-the-board layoff. Reduction of job positions is the last resort,' said Mr Arena in an internal memo, adding that any layoffs would be due to the need to restructure individual teams in light of declining economic activity.

He also emphasised there would be no reductions in pay or changes in the salary scale. But unpaid leave would be introduced to allow more flexible adjustment of resources.

Mr Arena said management would minimise the impact on junior staff but managers and senior staff would be expected to take at least two unpaid days' leave each month until the end of the year.

The entire engineering department would be asked to take leave to reduce operating expenditure.

Gordon Tsui Sai-cheung, of the Federation of Trade Unions, who has been leading PCCW employees and contracted staff in a battle against the management of the telecoms giant, said workers would not accept the company's proposed arrangement.

'The company says there is no across-the-board layoffs, but employees are sacked unit by unit,' he said. 'It also says there will be no wage reduction, but unpaid leave will be introduced which will translate to a salary cut after working days are reduced.'

He said about 10 employees were sacked last Thursday.

Mr Tsui said the unpaid leave arrangement varied between departments. 'Taking two days leave for no pay means workers will have to suffer a pay cut of 10 per cent every month.'

The union plans to protest outside the Central Government Offices on Sunday. 'PCCW has no reason to introduce pay cuts or layoffs. It is still enjoying profits and it should not sack workers and set a bad example.'