Is There a Difference between a Layoff and a Furlough?

What is the difference between layoffs and furloughs? Is there a difference at all or do we just use different words to soften the blow? Let’s clear some things about the various terminologies that are in use.

We have frequently covered reports of job cuts over the recent months and going through them is harrowing for everyone involved. While there are many different words we use in the context of workplace reorganization efforts, there is a difference between some common terms like layoffs and furloughs. Whether you look at it from the perspective of an employer or employee, it is essential to understand the concept of furloughs vs layoffs to comprehend the full scale of what happens after each procedure. 

Navigating the Difference between Layoffs and Furloughs

Businesses are forced to reduce their workforce for many different reasons. Very often, it occurs because the business has to reorganize its finances in order to continue making a profit and meeting targets, and employees are let go as a result to cut down on business expenses. While this is a common reason we’ve seen for job cuts, layoffs and furloughs could also occur due to many other reasons, for example:

• Plans to streamline the business in a different direction leads a business to shut down departments that are no longer relevant
• A project falls through and employees associated with it are no longer required
• Mergers between businesses result in many overlapping roles and not enough work to go around
• A company over-hires and has more workers than it needs to get the job done
• Advancements in technology that make specific roles redundant
• The company plans to offshore work or hire temporary contractors instead of keeping someone on locally or full-time
• Poor performance of employees or departments prompts large-scale job cuts
• Plans to rehire workers with different qualifications or experiences
• Businesses have an off-season when they don’t need as many workers
• Employers have a temporary lack of funding and need to find a new investor before they can get back to full capacity

All of these reasons for job cuts can occur at any given time and employers are then forced to turn to their labor force and adjust them to suit their needs. Depending on the situation, layoffs or furloughs come into play.

What is the Meaning of a Layoff?

During a layoff, a large selection of employees are permanently let go from the organization and asked to look for employment elsewhere. With layoffs, the company decides to cut down on its workforce for varying reasons, and most often, employees are put on their notice period where they have to begin handing over their responsibilities to someone else. 

A single worker might be fired due to a fault of theirs, but layoffs are slightly different. In some cases, layoffs do occur when a large number of employees fail to meet the expectations of the organization, however, layoffs occur on a much larger scale and are not due to a single underperforming worker. 

Depending on the contract between the employer and employee, the job cut may be effective immediately or the employee might have to serve their notice period before they are let go. Some organizations provide severance pay and additional compensation to the workers who are being let go, but it isn’t always provided by default. The Worker Adjustment and Retraining Notification (WARN) Act attempts to provide some protections for employees who are laid off but it does not cover every single organization. 

What is the Meaning of a Furlough?

A furlough refers to a temporary restriction on an employee’s role, where they are granted an unpaid leave of absence. Under such conditions, the employee is still retained as a part of the workforce but they are given an unpaid break from having to fulfill their roles. Furloughs can be tough on employees as they often go on for extended periods at the discretion of the employer and employees can’t find alternate temporary employment during that period. For those who work paycheck to paycheck, this can be very difficult. 

In many cases, employees still retain their benefits so they might be covered by some advantages, such as employer-supported insurance for example, but they aren’t required to come into work. This allows employers to reorganize their finances and find funding before they can have employees work for their wages again. 

The Fair Labor Standards Act (FLSA), requires that salaried employees are paid in full for any work that is done even if employees don’t come in for their full hours, so employers have no choice but to avoid asking for any work from the employee during that period. These furloughs cannot be extended endlessly and employers need to inform their workers about their plans and when they can expect the furlough to end.

Non-salaried employees who are paid hourly wages have slightly different circumstances. These furloughed employees on the other hand can continue to work, but the employer can cut down on the number of hours the employees are contracted to work. 

Furloughs vs Layoffs—What’s the Difference?

The difference between a layoff and a furlough might be clear just from the explanation of the two terms but we can map it out to make the primary elements of both more easy to understand.

• A furlough is a temporary period where the employee is sent away from work while employees who are laid off are permanently terminated from their role
• An employee does not receive their wages for the next few weeks after a furlough is announced, but an employee who is laid off gets all of their wages and dues for the rest of the notice period. A severance package is also offered most often
• During a furlough, most employees continue to receive their health benefits but following a layoff, all benefits from the employer are terminated
• Furloughed employees do not need to look for alternate employment unless their contract allows them to work elsewhere during the off-season but employees who are laid off have to look for an alternate job if they want to continue to work
• Salaried employees who are furloughed do not need to work for the employer until the furlough is lifted but if the same employees are laid off, they are required to complete their notice period unless the termination is immediate
• Furloughs can be turned into a layoff if the employer is unable to find a solution that allows them to bring back their workers. As a result, during a furlough, the employee is stuck in limbo, uncertain about what comes next. Employees who are laid off have a clear idea of the rest of their time with the employer and can focus on the next step in their career

Choosing between Layoffs and Furlough

In an ideal setting, we wouldn’t have to worry about the difference between layoffs and furloughs and all employees could continue to do the jobs they were hired for, but unfortunately, employers are forced to make difficult decisions sometimes. Both options of layoffs and furloughs have their own pros and cons and to determine what is right for the company, a thorough assessment has to be conducted. 

Layoffs are more appropriate when:

• There needs to be a permanent shift in business strategy for which employees need to be let go
• There is a need to rehire a workforce with entirely different qualifications
• There are more employees than work for them to do
• Overlapping roles are identified
• Employers are certain they cannot financially support employees after a temporary break
• The downturn period is expected to go on for an extended period
• The union agreements and legal federal requirements support a layoff rather than an extended furlough

Furloughs are more appropriate when:

• The employer is certain that they can find the investment necessary to bring back workers
• Then off-season fall in demand for their product is a regular and planned event
• Employers have valuable employees they know they want to retain
• The break in businesses is necessary to reorganize other resources and the work is being temporarily halted

Layoffs and furloughs are both largely unpleasant events but knowing the difference between the two can help you be prepared for what’s to come when it is announced. For an employer, there are advantages and disadvantages to both so ensure that you talk to the HR teams and the legal support system before making the decision. Remember to give the employees a heads up and act in good faith with them in the procedures that are to come. 

The post Is There a Difference between a Layoff and a Furlough? appeared first on The HR Digest.

Source: New feed