A job furlough is a workforce action taken by an employer, often in response to financial hardship, economic downturns, or temporary business disruptions. This action represents a temporary suspension of work and pay, implemented to reduce operating costs while allowing the business to retain its trained workforce. For the employee, being placed on a furlough means a mandatory leave of absence from the workplace, with the understanding that they will be called back to their position once business conditions improve.
Defining Furlough
A furlough is defined as a mandatory, temporary leave of absence from work, typically without pay or with a significant reduction in scheduled hours. The defining characteristic is the employer’s explicit intent to bring the employee back to their former position when the temporary situation is resolved. This cost-saving measure avoids the permanent separation of employees who possess valuable knowledge and experience.
For exempt employees, who are paid a salary regardless of hours worked, a furlough must generally be implemented in full workweek increments. They must be strictly forbidden from performing any job duties during that time. Hourly, or non-exempt, employees may have their hours reduced instead of being placed on a zero-hour schedule, which still qualifies as a furlough. The employment relationship itself remains intact, even though the employee is not actively working or receiving regular income.
Furlough Versus Layoff
The distinction between a furlough and a layoff centers on three main criteria: the expectation of return, the continuation of benefits, and the employee’s status within the organization. A furlough is explicitly temporary, with the employer intending to recall the employee when business conditions improve. Conversely, a layoff is a permanent separation from employment; there is no commitment or guarantee of a return, even if the individual may be considered for rehire later.
In terms of employment status, a furloughed worker remains on the company’s roster, preserving their status as an employee. A layoff, however, is a termination of employment, meaning the individual is completely removed from the payroll and internal systems. This difference in status often impacts the continuation of employer-provided benefits.
Companies frequently maintain health insurance and other benefits for furloughed staff, though the employee may be required to pay their portion of the premiums. Following a layoff, benefits typically end immediately, although the former employee is entitled to continuation coverage options, such as COBRA. A furlough does not require severance pay, as the employment relationship is not terminated, while a layoff may trigger severance obligations based on company policy or agreements.
Compensation and Benefits During Furlough
The financial impact of a furlough is immediate, as compensation is typically suspended or significantly reduced for the duration of the mandatory leave. For employees on a full furlough, wages or salary payments cease completely, representing a sudden loss of regular income. If the furlough involves a reduction in hours, the employee is paid only for the limited time they are permitted to work.
The status of employer-provided benefits, particularly health insurance, is a major consideration. Many employers choose to continue active health coverage, often requiring the furloughed employee to continue paying their premium contribution. If an employee’s hours are reduced below the health plan’s eligibility requirements, they may lose active coverage and be offered COBRA, similar to a termination.
Regarding accrued Paid Time Off (PTO) or sick leave, the rules vary based on company policy and state law. Since employment has not been terminated, an employer is generally not required to pay out accrued PTO simply because an employee is furloughed. However, employees may often be allowed to use their accrued leave balances during the furlough period, which can provide a brief continuation of income.
Employee Rights and Unemployment Eligibility
Furloughed employees are generally eligible to apply for unemployment insurance (UI) benefits through their state’s program, as they are out of work through no fault of their own. Even if the furlough involves a significant reduction in hours rather than a complete cessation of work, partial unemployment benefits may be available in many states. This temporary financial assistance is administered by state agencies, and eligibility criteria, benefit amounts, and duration are subject to state-specific laws.
The process of filing for UI typically requires the employee to submit a claim in the state where they worked and meet certain earnings requirements. While specific laws govern the process, it is generally advised to file a claim promptly in the first week of reduced or eliminated work.
Managing Your Professional Life While Furloughed
A furlough period presents an opportunity to focus on professional growth and development while maintaining a connection to the employer. Employees should prioritize maintaining open lines of communication with their manager or Human Resources department to stay informed about the company’s status and the expected return-to-work date. Regular check-ins demonstrate continued engagement without violating the prohibition on performing work.
The suspension of work can be utilized for upskilling and acquiring new certifications that enhance future career prospects. Pursuing online courses, attending virtual workshops, or taking part in industry-specific training can make the employee a more valuable asset upon their return. Financially, it is necessary to immediately review and adjust the household budget to account for the reduced or eliminated income, and to explore temporary work options that do not conflict with the eventual recall.
The End of the Furlough Period
The conclusion of a furlough period typically involves a process known as “recall,” where the employer notifies the employee to return to their regular work schedule. The employer should provide clear communication regarding the date of return and any changes to the work environment or employee expectations. Since the employment relationship was maintained, the return to work is often a straightforward reactivation of the employee’s status and payroll.
While the expectation is to return to work, employees must also be prepared for the possibility that the furlough may transition into a permanent layoff. If business conditions do not improve or worsen during the temporary suspension, the company may be forced to terminate the employment relationship. In this scenario, the company would then follow the procedures for a permanent layoff, including final pay and benefit continuation requirements.