GENEVA (Reuters) -The International Labour Organization faces "critical" cash flow problems and could abolish up to 295 posts - about 8% of its workforce - if the United States and other countries do not pay their dues, according to an internal document.

The 35-page draft document, sent to staff on Monday by ILO Director-General Gilbert Houngbo and seen by Reuters, outlines proposals to reform the U.N. agency, which promotes international labour rights, and reduce costs.

The proposals, which also include the possibility of moving dozens of staff out of the ILO's Geneva headquarters, will be subject to further consultations before being presented to its governing body in November.

"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," the document states.

'A CHALLENGING FINANCIAL AND LIQUIDITY SITUATION'

The U.S. is the largest donor to the ILO, which won the Nobel Peace Prize in 1969 for its contributions to improving labour conditions globally and protecting human rights. It has helped remove many children from child labour.

It was not immediately clear what impact cuts would have on operations.

The U.S. contributes 22% of the ILO's regular budget but owes over 173 million francs, with China, Germany and others also behind on payments. The U.S. did not immediately respond to a request for comment.

The ILO, which says on its website it employs around 3,500 staff, brings together governments, employers and workers to set labour standards around the world.

In a statement to Reuters, the ILO said it was, like the wider U.N. system, facing "a challenging financial and liquidity situation due to delayed assessed contributions" that had affected its cash flow.

"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," it said.

"The ILO senior management keeps staff regularly informed about developments and is in dialogue with the Staff Union as part of this process."

TWO MAIN SCENARIOS

The document seen by Reuters sets out two main scenarios. In what it depicts as the worst case, a 20% budget cut in 2026-27 - up to 295 posts could be axed across all locations and grades could be cut to help make savings of $93.2 million.

Some 225 jobs have already been shed at the ILO's Geneva headquarters and field offices this year because of cutbacks in U.S. funding under President Donald Trump. The ILO's $930 million budget for 2026-27 was approved after this - in June.

The document said regular budget contribution collection had slowed in September "to the point where programme needs could no longer be fully funded". Reserves are sufficient to pay staff salaries until the end of 2025 only if costs are controlled through travel and hiring freezes, it said.

POTENTIAL JOB RELOCATIONS FROM GENEVA HEADQUARTERS

Under proposals involving a less severe funding situation, a quarter of professional staff in administration, communication and research in Geneva - 72 positions - could be relocated.

Relocating 50 Geneva staff to a training centre in Turin could save $6 million over two years, the document said.

Some posts covering Europe and Central Asia could move to Budapest and some responsibilities for Arab States could relocate from Beirut to Doha, it said.

Vacating and renting out two floors of the Geneva headquarters could generate $5.4 million in rental income over two years, it added.

An ILO Staff Union resolution has voiced "profound concern" over the financial "crisis" and the draft proposals and said management had not participated in "good faith social dialogue" about the plans.

The proposals are separate to U.N. Secretary-General Antonio Guterres' plans to shrink the United Nations' regular budget by 15%.

($1 = 0.8041 Swiss francs)

(Editing by Dave Graham and Timothy Heritage)