Furlough refers to a break from work where employees retain their positions but do not receive payment for a period of time. Furloughs can be either term or long-term depending on the circumstances.
Let’s explore:
Furlough Definition
The concept entails granting employees a period off due to unique circumstances within an organization. It is a leave of absence. Furloughed employees typically maintain their positions. The furlough itself does not involve providing compensation or closing business operations.
Differences between furlough and layoff
While furloughs and layoffs may appear similar, their requirements and effects can differ significantly.
After exploring the meaning of furlough it’s important to understand what a layoff entails. While a furlough is intended as a measure, a layoff represents a termination of employment including pay and benefits.
When you are furloughed, there is an opportunity for your return, which’s seldom the case with layoffs.
During a furlough, employees are expected to resume their schedules once it concludes. However, their working hours may be significant.
They may have an absence. In contrast, a layoff essentially means an end to employment often due to lack of work.
When an employee experiences a layoff their connections with the company come to an end. Prolonged job loss can be caused by disruptions or financial difficulties.
How Employee Benefits from Furlough
When the leave period ends, employees can return to their work at the reduced level of productivity. Taking leave is advantageous to employees as it ensures job security.
At the end of the leave period employees have something to go to. Additionally, they can also receive unemployment benefits during their time at work.
How Employers Benefit from Implementing Furloughs
Implementing furloughs is beneficial for businesses in ways;
1. Cost reduction:
If there is a downturn in the market and insufficient work or funds to pay all employees, businesses can reduce costs by placing some employees on leave.
Furthermore, since these employees can be called back when needed employers don’t have to incur expenses on recruiting and training staff.
2. Continued access to skilled workforce:
Since furloughed employees have not been terminated businesses can recall trained staff as and when required.
Disadvantages of Furloughed Employees
Risk of losing talent
Performing individuals around you are likely to secure new jobs while you are still in business. Whether it’s just two weeks away or not employees will probably take advantage of this time to update their resumes and look for job opportunities.
If not, the employer has decided to hire and train employees for positions.
Loss of productivity
When employees return to work their productivity and efficiency may be affected. Employees who were furloughed might need some time to get back into the groove and reach their levels of productivity.
The challenge arises when employees have to regain their routines with the level of efficiency as before.
Decreased employee morale
Reduced staffing and working hours can result in compromised customer service, delivery times and a decline in customer satisfaction.
If a furlough is unexpected, it may become uncertain about the company’s future. This can lead to increased stress, gossip, rumors and ultimately a decrease in productivity.
Lastly furloughs can have effects on employee benefits.
The insurer may set a number of hours that an employee must work to be eligible for employer sponsored healthcare coverage.
Employees who fall below this threshold due to reduced hours may unexpectedly lose their coverage. It’s wise to consult your insurance agent so they can guide you while navigating your plans.
Final Thoughts
Furloughs serve as a cost cutting measure during periods of business downturn.
Employers prefer implementing furloughs, then layoffs because during a furlough they retain access to their workforce.
If they were to opt for layoffs, they would have to go through the process of hiring and training employees, which can be both costly and time consuming.
FAQs
Is furlough the same vacation or paid time off?
Answer: No. A furlough is a break or reduction in hours. Pay that companies use to retain employees while managing their bottom line. The main goal of a furlough is to cut business costs while still keeping your employees employed.
Are benefits, such as health insurance, typically maintained during a furlough?
Answer: Typically, when employees are furloughed, they do not receive their salary. However, they often continue to receive employment benefits such as health insurance during the time they are not working. If you maintain your health insurance coverage you will need to continue paying your portion of the contribution.
Can employees seek alternative employment during a furlough?
Answer: Absolutely! Being furloughed from one job does not prevent you from finding another job if opportunities arise.
How long do furloughs typically last?
Answer: The duration of a furlough can ranges from short as one week to months. The length depends on the company. However, employee leaves of absence are intended as measures.