What Is Furlough?
Furlough is a temporary unpaid suspension from a job for as long as the employer deems necessary.
The word ’furlough’ has been heard multiple times since the start of the Covid-19 pandemic. However, as a cost-saving measure for businesses, furlough is an option for both private and public sector environments and was around long before Covid-19.
From as early as the 1980s, furlough schemes have allowed businesses to regroup, get their finances together and work out new business structures, without having to lay off large amounts of their workforce.
More recently, we have seen airlines and hospitality sectors use furlough, as they have seen their business decline rapidly since the start of the pandemic.
The word ‘furlough’ itself comes from the Dutch ‘verlof’ which translates to leave of absence.
Furlough can be a regularly scheduled event that takes place at the same time every year. This could be for seasonal businesses that only open during the summer or holiday season.
However, furlough can also be unplanned and can arise during slow periods or times when businesses do not have the resources to pay their staff for a certain amount of time.
There are both positive and negative implications when it comes to furlough; this article will explain the pros and cons from both the perspective of the employer and the employee.
Why Might an Employer Furlough Staff?
A seasonal business might want to furlough their staff if they require employees to take time off at certain times of year but want them to return.
A business might also put a furlough policy in place if they’re struggling financially and need to save money on salaries (but keep the workforce in place). This can be for a brief period or longer if necessary.
Not every furlough process is seasonal and can be enforced due to economic circumstances, like the Covid-19 pandemic, recession or days following tragic or unfortunate events.
For example, if an office building has been damaged and access is not possible. This is something that is out of both the employers and employees’ control, and they might need to introduce furlough to help them during an untimely lull.
Another example of a time when furlough might come into place is:
A beach club providing water sport services only needs staff during the summer season. Staff are contracted to work during ‘in season’ months and the company uses furlough during the months of the year they are not required to work.
What Can I Expect After Being Furloughed?
Being furloughed means you cannot do any work for your company, under any circumstances.
Any access you have to the company’s files will be temporarily revoked until your furlough ends. If you have a work cell or company car, these will also need to be returned to your employer for the furlough period.
This is to ensure that you do not break the rules and answer any emails, take any phone calls or discuss anything with clients.
If you do break these rules, the company is at liberty to pay you for the work you have done and your time, which will not sit well with your employer and will defeat the whole object of being furloughed.
An example of this could be:
You work for a technology company and you have access to your work emails on your personal mobile phone as well as on your laptop. Before your furlough starts, you will be asked to remove your work emails from any personal devices and be blocked from the company’s server.
The length of time you can be put on furlough can differ from company to company and there’s no time limit. You are still employed until the company decides to end the process.
This will allow employers to bring back staff when appropriate and not lose out on their talent, experience and training.
As mentioned above, you will not be paid during furlough but can claim certain benefits.
Some businesses, like Disney, will continue to provide their furloughed staff with healthcare or other employment benefits for at least a year.
Can You Work for Another Company if You Are Furloughed?
If your company has decided to furlough you rather than lay you off, it means they have every intention of bringing you back into the workforce when they can.
However, no stipulation prevents the employee from looking for and working another job whilst furloughed.
Indeed, some companies fall victim to losing top talent during the furlough process.
The rules may vary based on the state you live in and and the company you work for – we would always recommend seeking further advice if you are not sure.
Can You Claim Unemployment Benefits?
You may be able to claim unemployment benefits during this time to help you with your financial situation whilst you are not being paid. Again, this depends on what state you live in and the jurisdiction of that state, some people may not be eligible to claim unemployment benefits.
We would recommend getting further information on claiming unemployment benefits to see whether it is a viable option for your circumstances.
Quick Note. If you’re looking to apply for unemployment benefits you may be asked to prove you are looking for work and be asked to show up for appointments, this may differ due to regulations in your state, but failing to follow the correct process could prevent you from receiving benefits.
How Does Furlough Differ for Exempt and Non-Exempt Workers?
First of all, you may be wondering what exempt and non-exempt workers are and how it could be relevant to your situation.
Here’s a definition of each so you’ll be able to figure out which one applies to you:
Exempt workers are salaried employees who are normally paid on a pre-determined amount monthly. If exempt workers are placed on furlough, they would be entitled to a full day’s pay even if they only do one hour’s worth of work. As mentioned previously, employers have now decided to implement a no-work rule so employees cannot benefit from this.
Non-exempt workers typically are paid by the hour. If a non-exempt worker does any work during furlough, they must be paid, but only for the time they have worked. An employer may choose to cut hours or pay rates for non-exempt employees.
Non-exempt employees are also covered by FLSA rules and regulations whilst exempt employees are not.
What Are the Pros and Cons of Furlough?
You might wonder how being furloughed could benefit both the employee and the employer and what the pros and cons are of this process; as with most things, there are positives and negatives.
Pros and Cons for Employers
For employers, the pros of furlough could be the following:
Furlough means employers do not have to lay off valuable members of staff. This is a way for them to keep talent during slow periods and times of economic downfall, like Covid-19 or the recession.
It can also provide short-term help for seasonal businesses that are profitable at a certain time of year. This means they can endeavor to keep staff during the time the business is open.
Furlough can be a good cost-saving method for a company if/when they struggle financially. Businesses can furlough their employees for as short and as long as necessary which gives the business some flexibility.
It is at the companies’ discretion whether they would like to continue to provide their staff with their benefits package during the furlough period. If the company decides not to, this can also be classed as another cost-saving method. However, if they decide to proceed with healthcare, this might be an incentive for employees to remain with the company whilst they are being furloughed.
The whole furlough process is fairly straightforward for companies, whereas if they were to just lay-off their staff it can be expensive, time-consuming and harm a company’s relationship with their staff.
Employers will not have to take the time to train and recruit new members of staff if they put their current team on furlough, this is especially good for seasonal businesses who offer water sports and other specialized work. This will save the employer time and money.
By having the opportunity to furlough staff, employers will have more flexibility and time to plan ahead, be it financially or with other business ideas.
For employers, the cons of furlough could be the following:
The main disadvantage of furloughing staff for the employers is the potential risk of losing their talent completely. Depending on how long they plan to pause employment, some staff members might use furlough as the perfect opportunity to seek new challenges.
The cost. Even though employers will be saving money by furloughing staff, they may need higher-level members of staff to cover some work. Also, as mentioned above most companies still allow their staff to keep benefits like healthcare which can still be quite costly for the company.
Losing momentum. A big disadvantage to furlough is losing motivation from the work force. Projects would have to be paused, which means it can take a while for staff to get back in the swing of things. This can cost the company time and money to get things started again.
Employees can also lose morale as they will not know what their future holds at the company, this can create an anxious workforce which could then, in turn, be unproductive.
Pros and Cons for Employees
For employees, the pros of furlough could be the following:
For most staff, furlough is better than being laid off completely, this also keeps the faith as the company has every intention of keeping you on, which is more positive than being let go completely. Most companies will also give you a return to work date.
Health benefits. Most companies will continue to provide healthcare (and sometimes other benefits) for at least a year.
You have time. Most companies will implement a ‘no work policy' which means you cannot work for the company whilst you are being furloughed. This will then give you time to look for other work if you want to change careers, or take time for yourself.
You will usually be entitled to state benefits, which can sometimes be more than your original salary.
For employees, the cons of furlough could be the following:
Employees can feel left in limbo as they are still employed, however cannot do any work (for the business they are employed by) and will not receive a salary. Some employees might be unsure as to when exactly they will return to work.
Benefits are not guaranteed. As mentioned above, most companies will still provide their employees with benefits; however, at the discretion of the company, some businesses might not be able to do this due to finances. This is rare but is still a big blow for employees.
You cannot take on full-time employment at another job whilst you are still furloughed. You might be able to take on part-time or temporary work depending on your company’s protocol – some businesses might not mind you taking on other work, whilst some might contract you not to.
Lose motivation. It can be difficult to return to work and pick up where you left off once your furlough ends.
Financial support. Depending on what state you are in, you might not be able to receive employment benefits which can make the period where you are furloughed difficult financially.
There is a lot to consider when thinking about whether you furlough staff. There are negative and positive ramifications for both the employer and the employee, and both parties must do their homework and know where they stand.