Economic uncertainty is hard on everyone, from employees (both public and private), to business owners, to federal government enterprises.
When the going gets tough, businesses often need to make some difficult decisions, which can often involve furloughing or laying off employees to minimize spending and keep afloat.
For employees, these terms are not only concerning, but confusing.
What is the difference between being furloughed and being laid off, and what does it mean for you?
That’s what we’re going to cover in this article, along with employee rights, and what to do if you’ve been furloughed.
Furlough is the technical term for mandatory leave without pay.
That is, you’re not working, and you’re not being paid.
It’s different from being laid off, because you still have the job, and you’ll be asked to return to work when they need you.
Furloughs are tough for everyone involved, especially employees who suddenly find themselves without pay.
Often, your furlough is in effect until further notice, meaning you won’t know precisely when they’re going to need you back at work, making the process even more challenging for furloughed workers.
In short, yes, furloughs are legal.
Being furloughed is incredibly unfortunate and difficult for employers, but they are often necessary to allow businesses to stay afloat.
Generally, the alternative solution to a furlough (from the company’s perspective) is to lay staff off altogether.
From that perspective, you can begin to understand why furloughs are legal.
The main reason why companies choose to furlough employees is that they no longer have the cash flow available to pay them.
For some businesses, this happens seasonally, such as ski resorts that have very few customers during the summer.
Often, thorough, it is a result of unforeseen circumstances.
For example, amid the coronavirus pandemic, approximately 23% of the US workforce filed for unemployment.
Many businesses shut their doors due to COVID-19 cases and government restrictions.
The employees of these businesses have either lost their jobs entirely or been furloughed until further notice.
Companies often choose to furlough employees if they believe the shutdown or slow down will only be temporary, as it allows them to retain their staff.
This means they can get back to normal much more quickly, as they have employees waiting in the wings. If they chose to lay their staff off, however, they would need to go through the hiring process all over again when life gets back to normal.
Yes, if you’ve been furloughed, you are entitled to look for another job.
Just like any other time, you’re allowed to find a new job and resign from your current one.
In some cases (and this depends entirely on your specific contract), you’ll be allowed to get a temporary job to fill the gap during your furlough.
Another option, depending on the laws in your state, is to file for unemployment, which you can receive until the furlough ends.
To put it simply, no.
The point of a furlough is to allow a business to minimize outgoing costs during a period of time where cash flow is limited, so they are unable to pay employees.
Employees may qualify for unemployment benefit payments while on furlough, but they won’t receive a paycheck from their employer.
The difference between furloughs and layoffs is that when you’re laid off, you lose your job and all of its associated benefits (such as health insurance).
With a furlough, the expectation is you’ll go back to work at some point. So, you also typically retain your company benefits (health care, sick leave), aside from your wage or salary, of course.
From the company’s perspective, furloughs are much more seamless and less disruptive.
Layoffs can be incredibly time-consuming and are often expensive for the business due to certain procedures that need to be followed.
This kind of unpaid leave can happen for part-time and full-time employees in both the private and public sectors.
In the private sector, companies typically only furlough their employees during periods of economic downturn, which may be widespread or simply limited to their industry.
In some cases, private companies use furloughs to get through seasonal production cycles, for example, in the farming and agricultural industries.
In the public sector (such as the federal government), furloughs can take place when new spending has not been authorized, or during government shutdowns.
During these times, some employees may be furloughed until spending is re-authorized or the government lockdown ends.
Finding out that you’re being furloughed is challenging for nearly all employees, but as with many things, it’s made easier if you’re able to prepare in advance.
If you’re hearing rumors of short-term furloughs floating around in your office, here’s how to prepare:
Make sure you’re living within your means. That means cutting down on unnecessary spending and reducing credit card debt.
Start saving. One of the challenges furloughs present is that the period of unpaid time may last just a few weeks, or it can take months until you return from your leave of absence. Having a safety net of cash to fall back on can help to ease this transition.
Get your resume up to date. You may decide to look for a new job during your time off. This can be a smart idea if you’ve been furloughed by a small business that might never recover. Having your resume up to date in advance will minimize the amount of time you spend without pay.
Look for ways to cut costs. When you’re receiving a full salary, some extra expenses (such as dining out) may be within reach. If you’re furloughed, however, these become unaffordable luxuries. Look for activities and expenses you can cut back on. Maybe it’s time to trade in your car for a more affordable model, or cancel that gym membership.
Create a budget. Figure out what your minimum outgoing expenses are to establish a baseline, and practice sticking to that figure while you’re still being paid. This can help make the transition to furloughed life smoother.
An unfortunate truth about furloughs is that sometimes they begin immediately with no prior notice.
If you suddenly find yourself furloughed, here’s what to do:
If you’re lucky enough to be in a position to choose, decide whether you want to wait and see what happens, or get another job as soon as possible.
Talk to human resources about your employee rights, and what happens to things like your health benefits. Find out if you’re allowed to take a temporary job in the meantime.
Start looking for another job to move onto, or seek out a temp job if your contract entitles you to.
Consider working remotely for companies outside of your area. Not only does working from home bring a number of benefits (like no more daily commutes), it also widens the pool of jobs you can apply for, as you’ll be able to search for jobs outside of your immediate physical area.
Consider using this time to pursue further study or to upskill in an area that will improve your future job prospects.
If you’ve prepared well for the furlough and have a safety net to fall back on, enjoy the break! A bit of time off from work can be great for your mental health, and you’ll likely notice a lift in productivity when you get back to work.
When you’re furloughed, you’re still an employee, so you still have a number of entitlements.
The first thing you need to know as a furloughed employee is that you are legally not allowed to work for the company, in any capacity, unless you’re considered an exempt employee.
That means that once you're furloughed, you can’t even go in for 5 minutes to finish up yesterday’s job.
You also have the right to:
Seek new employment
Get a temporary job (depending on your contract)
Consider and register for unemployment benefits (depending on laws in your state)
There is no doubt that as an employee, being furloughed is a difficult time.
However, with a bit of preparedness and sound knowledge of your employee rights during a furlough, you can make it out the other side and potentially even find yourself a new job with greater career prospects and new learning opportunities.
If you’ve been furloughed and you’re in the market for a new job, check out our job search.