Furlough vs Layoff: The Differences You Need to Know


differences between furlough vs layoff

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The coronavirus pandemic is having a significant impact on the world economy. As of March 26, 2020, over 3 million people filed new unemployment claims, more than doubling most projections of 1.5 million.

And with those new claims likely comes confusion. Did your employer tell you you were laid off or furloughed? Do they mean the same thing? And, if they don’t, what’s the difference of a furlough vs a layoff? What rights do you have when your employer tells you you can’t come in anymore, but you’re still employed?

Navigating unemployment is difficult under any circumstances. However, understanding the difference between a furlough versus a layoff can help you plan your immediate future and provide a road map for your next steps.

What Is a Layoff?

A layoff typically happens when a company needs to cut costs quickly (though there can be other reasons for laying off staff). Because employee salary and benefits are usually the most expensive line items in a company budget, layoffs are the quickest and easiest way to reduce expenses.

While the hope is that a layoff is temporary, they can be permanent. Layoffs should not be confused with a reduction in force. A reduction in force happens when a worker is laid off from the job, and their position is eliminated (meaning the company won’t plan to hire for that position again).

What Happens When You’re Laid Off?

In some cases, the company may offer you a severance package—though there is no requirement that they do. Severance packages help blunt the economic impact of your layoff. They can include a lump sum cash payout or include COBRA payments that help you remain on the company health insurance plan until you find another job or purchase your own health insurance. Some companies may also offer you the opportunity to apply for another position in the company or provide job search assistance.

Depending on the reason for the layoff, there may be a recall list. This list tells you if and when you will be asked to return to the job, though it is not a guarantee that you will be rehired.

What Are Your Rights When You’re Laid Off?

Your employer may be required to give you 30-days notice that you will be laid off. The federal WARN act requires employers to give 30-days notice if:

  • The company has 100 or more full-time employees with at least six months on the job; or
  • Employs 100 or more staff that work at least a combined 4000 hours a week (in the private sector)

Other circumstances might require an employer to give you 30-days notice. For example, if your company experiences a mass layoff where between 50 and 499 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.

When you’re laid off, you can file for unemployment benefits. However, depending on the state you’re in, accepting a severance package can impact your unemployment benefits.

What Is a Furlough?

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. It is similar to a layoff in that it’s a quick and efficient way to cut costs when necessary.

Furloughs, however, are temporary and used to retain staff the company wants to keep but can’t afford to pay. 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. Or, they can opt to furlough some of their staff if, for example, certain staff provide “essential services.” Your employment status (exempt or non-exempt) may affect the type of furlough your company gives you.

Furloughs for Hourly Employees

Hourly employees will generally experience one of two types of furloughs.

Reduction in Hours

When you are an hourly employee, your furlough may not be a loss of work, but a reduction in the number of hours you’re scheduled to work. For example, if you usually work 40 hours a week, you may be asked to work 30 hours instead. You’ll make less money but still be employed. However, a reduction in your hours may also affect the employer-provided benefits you can receive.

Zero Hour Schedules

This is a furlough that happens when a company closes for the “foreseeable future”—meaning there is no solid reopening date—so no one is scheduled to work. For example, many restaurants affected by the coronavirus pandemic have 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

Salaried employees can also face furloughs. However, they are different than an hourly worker’s furlough.

Pay Cuts

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.

When a company furloughs salaried staff, it does not make sense for your employer to cut your hours since they are legally required to pay you the same amount of money even though you’re doing less work. 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.

For example, if you’re a salaried employee and you make $900 a week, your employer can cut your salary to $700 a week for the long-term as a condition of you keeping your job. What your employer cannot do is cut your pay to $700 for one week, raise it to $800 the next week, then drop it to $600 the next week, then back up to $900. If your employer does this, you might be considered an hourly employee, which could impact how your employer is required to pay you.

No Work

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. In this respect, all of your “hours” are cut, and you are not paid.

If your employer chooses this furlough, you cannot perform any work under any circumstances. Even a quick “two-second email” counts as work, which, under the current labor laws, means your employer would be legally required to pay you your full weekly salary for that particular week.

When you are furloughed under “no work,” you’re likely to find your access to all things work-related revoked. 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.

This is not meant to scare you, and it doesn’t mean you’re losing your job. It’s intended to keep you from working at all—even if you don’t mind—until the company is back on its financial feet. The no-work rule is non-negotiable, and employers can’t take the chance that you work or else they have to pay you.

What Are Your Rights When You Are Furloughed?

When you are furloughed, in general, you keep your benefits. This includes, for example, health and life insurance. You also retain your employment rights, meaning that you cannot be fired during your furlough.

You may also be able to collect unemployment benefits during any kind of furlough. Whether your hours are cut, or you’re on a zero work schedule, some states allow furloughed employees to receive unemployment to make up for any pay shortfall. Once you’ve made zero dollars in a week, you are eligible to file for benefits.

Furloughed employees are also allowed to seek other permanent employment. However, you may not be allowed to take a temporary job. Some employers consider temporary jobs during a furlough “outside employment” and could be a violation of your work agreement. If you are facing a furlough, make sure you read the fine print to see if you could seek a temporary job.

Learn More

The most important thing to remember is that whether you’re laid off or furloughed from a job, it doesn’t have to do with performance. People are laid off or furloughed because the company and/or the industry is having problems, not you.

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Photo Credit: bigstockphoto.com

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Rachel Pelta is a Content Coordinator for FlexJobs. With professional experience in job placement and as a manager, she creates content to help people succeed in their job search, and to help managers get the best out of their staff.…Read More >

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