Sometimes businesses do not recover sufficiently to bring back furloughed employees, in which case, they may be laid off. When this happens, employers must comply with WARN laws and any state regulations governing layoff notifications.
There are pros and cons to both furloughs and layoffs. On one hand, furloughed employees may continue to have health benefits and a chance to return to their job at a later date. On the other hand, employees who are laid off get a head start on finding a new job, which may be better than a protracted furlough that results in a layoff anyway.
This guide is intended to be used as a starting point in analyzing furloughs and layoffs and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services. What is a furlough and how does it work?
Furlough for salaried or exempt employees Under the rules of the Fair Labor Standards Act FLSA , exempt employees must be paid their full salary for any week in which they perform work, regardless of the actual hours. Furlough for hourly or non-exempt employees Unlike salaried employees, hourly workers who are furloughed may continue to work in some circumstances.
How long can a company furlough an employee? Learn More. Top 6 payroll and HR mistakes that startups make. Learn more. View now. Read now. Get pricing specific to your business. Are you a current ADP client? Yes No. Step 1 Step 2 Step 3. Your privacy is assured. Other circumstances might require an employer to give you days notice.
For example, if your company experiences a mass layoff where between 50 and full-time employees are laid off at the same time, your employer may have to give you advance notice. If you are offered a severance package, you are not required to take it. Accepting a severance package may require that you give up some of your rights. For example, you may have to sign a non-compete agreement that forbids you from working for certain employers or with certain clients for a period of time.
A furlough is an alternative to a layoff. Furloughs can take different forms, but the end result is the same: workers remain employed but are paid less , or not paid at all, saving the company money. Furloughs can happen in any industry, and in both private and public companies. In most cases, there is an end date to the furlough think: seasonal employees who know they only work from May 1 through September 30 , but that is not always the case.
A company can furlough all of its staff. For example, if you usually work 40 hours a week, you may be asked to work 30 hours instead.
However, a reduction in your hours may also affect the employer-provided benefits you can receive. For example, many restaurants affected by the coronavirus pandemic switched staff to zero hour schedules. Restaurants are open for carryout or delivery, but they do not have enough work for the entire staff. So, for example, they are telling servers they are still employed, but not scheduled for any hours in a given week.
Salaried employees can also face furloughs. Salaried employees are not paid by the hour. They are paid the same amount per week, no matter how much or how little they work. Their pay is not reduced if they only work five hours a week, and they do not get overtime pay if they work more than 40 hours a week. Instead, your employer can reduce your pay as long as the pay cut is a long-term plan to keep the business viable, and they keep the pay cut consistent.
If your employer does this, you might be considered an hourly employee, which could impact how your employer is required to pay you. On the other hand, your employer can furlough you similar to a zero-hour schedule. You are still employed by the company but not allowed to work. If your employer chooses this furlough, you cannot perform any work under any circumstances. You may not be able to access company email or files on the company cloud. If you have a company-issued device, you may have to turn it in.
When you are furloughed, in general, you keep your benefits. This includes, for example, health and life insurance. You may also be able to collect unemployment benefits during any kind of furlough. Furloughed employees are also allowed to seek other permanent employment. However, you may not be allowed to take a temporary job. If you are facing a furlough, make sure you read the fine print to see if you could seek a temporary job. And if you have been furloughed and do want to search for other permanent employment, our FlexJobs career coaches have extensive experience helping people in exactly this situation.
Just purchased the 3 - Month plan. Just purchased the Monthly plan. Just purchased the Yearly plan. More of This Week's News. Additionally, you must maintain clear communication with furloughed employees and possibly the state unemployment insurance department. Valuable employees might quit. During a furlough especially an extended one , employees may seek employment elsewhere. Although the goal is to retain top talent through a furlough and bring them back when it ends, nothing is stopping them from looking for other jobs in the meantime.
Furloughs can lower employee morale. When you furlough employees, you may see a decline in company morale. Furloughs are often associated with unstable environments, which can put employees on edge. Subsequently, when you bring furloughed employees back on the schedule full time, you may notice a decline in their job performance or company morale as well.
How does a layoff work? Pros and cons of laying off employees Aside from cutting salary costs, there are three primary advantages to layoffs: It can save your business a lot of money. Laying off employees can save your business more than just the money you were paying for salaries. Following a layoff, the employer is not responsible for providing the terminated employees with benefits and insurance, as they would with a furlough.
Laid-off employees get a clean break. Govro said layoffs make it clear to the employee that it's time to move on and look for new employment, whereas a furlough may give them false hope and delay their job search. This can be better for the employee in the long run. It can be better for your business reputation.
The employee's "clean break" can also be positive for your company's reputation. Treating your employees with respect when you lay them off can foster more goodwill than leading an employee on with a furlough that never ends or that ends in a layoff anyway.
Aside from the obvious disadvantage of having a smaller workforce, these are three downsides of layoffs: Terminating, recruiting and hiring employees is expensive. Firing and hiring employees can cost your business a lot of time and money. You need to compare how much you will save by laying them off to how much it will cost to replace them if or when you are ready to increase your workforce.
You may permanently lose valuable employees. Unlike a furlough, a layoff does not afford the luxury of retaining your employees. If you lay off top talent, you lose out on their valuable expertise and company knowledge. Layoffs can lower company morale. Layoffs are similar to furloughs in that you are likely to encounter lower company morale.
The employees who aren't laid off often have to take on a bigger workload, which can lead to burnout. Stafford also said that the "survivor's guilt" of those who did not lose their job can be weighty, impacting the organization long after the decision is made and communicated.
Choosing between furloughing and laying off employees Although there is often no clear answer as to whether an employer should furlough or lay off their employees, some businesses are restricted in their choices. Dalal gave some examples: For small businesses that employ union employees under a collective bargaining agreement CBA , the release of employees for any reason — furlough, layoff or straightforward dismissal — is governed by several rules in the CBA.
Employees of a major corporation — one that either cannot lose market share or is part of the national security apparatus — are much more likely to be furloughed, such as when a rotating employee schedule might open up more work while also easing financial burdens. Business News Daily Staff. Skye Schooley is a staff writer at business. In addition to researching and analyzing products that help business owners launch and grow their business, Skye writes on topics aimed at building better professional culture, like protecting employee privacy, managing human capital, improving communication, and fostering workplace diversity and culture.
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