Understanding Furloughs vs. Layoffs
Some businesses are having to make tough choices during this temporary, financial downturn. If your organization has qualified as “essential”, you are still open for business and may not have to take immediate action to offset a reduction in revenue.
But for those companies that have been negatively impacted by being closed or providing reduced services, there are human resource options. One of these is to furlough employees as an alternative to a layoff. We’ve been taking calls and consulting clients to help them talk through what steps are best for their business needs.
What is the difference between a furlough and a layoff?
Furloughs can be a temporary reduction in employees hours of work—32 hours instead of 40.
It can also be a period of time they’re required to take unpaid time off.
A Furlough may include asking employees if they’d like early retirement, with a severance.
Furloughed workers remain on your books as current employees. If they are laid off, they don’t.
Furloughs are usually for a shorter, fixed period of time as opposed to being permanently separated from employment due to a reduction in workload.
Furloughs are a mandatory unpaid time off, not a termination of employment.
Before you decide whether to layoff or furlough, make sure you understand the implications of how it applies to human resource risks. Management should consider the risks and possible violation of HR regulations and legislation.
Things to consider before deciding which is better for your business:
Fair Labor Standards Act (FLSA) — Furloughing exempt employees could result in jeopardizing their exempt status.
Cobra — How does this affect the employees’s ability to qualify for their benefits? A furlough could be a triggering event which would cause the employees benefits to be dropped.
Unemployment — Both laid-off workers and temporarily furloughed workers are eligible for unemployment benefits.
Affordable Care Act (ACA) — If a furloughed employee is prematurely dropped from group coverage this could violate ACA.
Here are some helpful resources to learn more about furloughs:
Merriam-Webster ‘Furlough’ vs ‘Layoff’
Gusto How to Decide Whether to Furlough or Lay Off Employees
SHRM What is the difference between a furlough, a layoff and a reduction in force?
Remember, we will bounce back.
Once we are back to business as usual and the virus is contained—we’ll all be hiring again and we’ll go back to full-time hours. Stay positive, make good decisions, and use your resources to mitigate risks.
We’re here for you.
If you need specific questions answered or could generally use some guidance to help you during this time in your business—our team is here to support you. Click below to book a 1-hour consultation with our Executive Team.
Investment: $250