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March 19, 2020

Furlough vs. Temporary Layoff 

Both layoffs and furloughs are unpaid time off; the distinction being that furloughed employees have a guarantee of returning to their jobs, while layoffs can be made permanent. In the absence of a manual or policy, employers can implement either course, depending on the culture of the company and the anticipated amount of time workforce needs to be reduced.

A layoff is the removal of an employee without any guarantee of returning to work. Layoffs are for longer periods and employees typically do not continue to receive benefits unless they remain on recall list. (at the discretion of the employer) Laid Off employees can apply for unemployment benefits.

Furlough is mandatory time off work for a specific amount of time, typically with no pay. A furlough is temporary, and employees still have their jobs return to work once regular business continues. Generally, employees on furlough continue to accrue vacation time and receive other benefits, such as health insurance. Furloughs are not generally long enough for employees to seek unemployment benefits.

There is flexibility with furloughs at the employers' discretion which can include:

  • Reduced Hours, either intermittently or week(s) at a time.
  • Partial Pay - Partial PTO could mean an employee is paid for some days (e.g., two days), part of the day, or a portion of their regular wages
  • Continuation of benefits
     

Employers must be careful when furloughing exempt employees so that they continue to pay them on a salary basis and do not jeopardize their exempt status under the Fair Labor Standards Act (FLSA). A furlough that encompasses a full workweek is one way to accomplish this, since the FLSA states that exempt employees do not have to be paid for any week in which they perform no work. https://www.nolo.com/legal-encyclopedia/furloughs-hour-cuts-pay-cuts-33484.html

Advantages of Furlough

  • Avoid layoffs and rehiring costs
  • Employee confidence in returning to work after only a short period of time.
  • Saves compensation costs on wages, severance pay and higher unemployment insurance premiums.
     

Disadvantages of Furlough

  • Limited savings: Expenses will be cut, but they will not be eliminated. Those who need to do some work to prepare for the end of the furlough likely will come from upper management, who are the highest paid. Additionally, benefits may still be paid to employees during a furlough. Wage and Hours laws can be tricky during furloughs. https://www.nolo.com/legal-encyclopedia/furloughs-hour-cuts-pay-cuts-33484.html
  • Potential to lose employees
  • Lower morale: Employee stress and fear for the future

 

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