Furlough Vs. Layoff, What's the Difference? An Owners Guide

It’s a tough time to be a business owner, with more challenges to navigate than ever before.
In times of economic crisis, many employers find themselves in the furlough vs layoff consideration. But what does that mean?

Both furlough and layoff methods are effective ways of downsizing employee costs, but with different implications.

As businesses and organizations make efforts to improve their finances in the face of the coronavirus economic effects, furlough and layoff options have become more prominent. 

Due to the fact that payroll is a heavy expense that every organization incurs, any attempt to manage the cost will prove worthwhile. Nevertheless, it is important to understand these actions and their respective implications before making a final decision.

Making the right choice will improve your finances as much as taking the wrong steps will leave your business in greater crisis.

What is the meaning of being furloughed?

To furlough an employee means to temporarily relieve them from their duties for a particular period. It could mean reducing their working hours or placing them on an unpaid leave of absence. Furlough is mandatory.

Unlike lay-off, furlough does not relieve the employee's duties permanently. This means that if you furlough your worker, the person still retains his job, but is temporarily neither working nor getting paid.

The major reason organizations furlough employees is lack of work or lack of funds. It is an effective way of eliminating redundancy and reducing payroll budget. If your organization is trying to regain financial stability from a crisis, furloughing your employees might be a useful option. 

Can you collect unemployment benefits if you are furloughed?

Generally, furloughed employees do not enjoy unemployment benefits because, in the real sense, they are not classified as unemployed.

Furlough is like a pause in employment and not necessarily a loss of employment, although it can degenerate to that level.

However, the rules for access to unemployment differ from state to state, and province to provicne, and may be affected by other factors. For instance, in the event of the COVID-19, the Coronavirus Aid, Relief and Economic Security (CARES) has extended its criteria for unemployment benefits, also, the Pandemic Unemployment Assistance (PUA) modified its unemployment benefits eligibility to accommodate people who would not have been eligible on a normal. 

These Coronavirus-inspired changes create room for furloughed employees to partake in certain unemployment privileges.

What are some of the benefits of an employee being furloughed?

Although furlough can come as unpleasant news to employees, it still has some advantages relative to losing a job entirely. Some of those benefits include:

There are high chances of work resumption.

As an employee, being furloughed does not mean you have been fired or laid off. Although there is no guarantee that you will not eventually be laid off, there is still hope at least. Furloughed employees still have good possibilities of resuming work at the end of the furlough at least.

It can be a useful break.

It all depends on how an employee handles the furlough period, but that time of work break can be very useful. Not being paid for some time can be quite limiting, but that free time can be used for some other meaningful purposes.

For instance, it can provide a busy worker with enough time to spend with their family and friends. You can even maximize the break to diversify your knowledge and economy by learning and/or mastering new skills. That way, the effect of the financial constraints can be cushioned, and more streams of income can be added.

You may have access to employee benefits.

Furloughed employees remain part of their organization's staff during the period of the furlough. As such, they are still entitled to other staff benefits such as health and life insurance.

Also, you may be eligible to benefit from unemployment privileges if you are furloughed. It depends on the benefit in view and the criteria for eligibility.

Easy staff restoration.

The processes involved in recruiting employees can be very tasking for organizations. When workers are laid off, employers will have to start the recruitment processes all afresh.

But with furlough, workers can be kept on standby and recalled when employers find their flow again. More importantly, employers can easily regain the services of their experienced workers instead of having to train new ones.

What is the meaning of a layoff?

When an employee is laid off, they are relieved of their duties on a more permanent basis. Although layoffs can be temporary at times, as in the case of furlough, the term is often associated with permanent dismissal.

A layoff is not to be mistaken with a sack. In most cases, workers are laid off not necessarily as a result of an offense or performance-related reasons. Layoffs are mostly due to lack of work or required funds to sustain an employer's payroll. 

On the other hand, sacks are mostly a result of supposed employee faults due to one event or the other. Such termination, unlike layoffs, mostly make it more difficult for the employee to be rehired.

If you're laid off as an employee, you do not have the opportunity of enjoying possible furlough benefits. You cease to be part of your employer's staff and must be rehired or re-employed to continue working with them.

Can you collect unemployment if you're laid off?

Employees who are laid off generally qualify for unemployment benefits unless they are otherwise employed by other qualified means. Most states provide unemployment benefits for laid-off workers, especially in the COVID-19 period.

What is better for your employees, furloughed vs laid off?

Furlough vs Layoff comparison can be difficult to be decided on. From the employees' perspective, many people will prefer to be furloughed than laid off. The chief reason is that furlough provides workers with more job security and seeming benefits.

However, some other people may prefer to be laid off than be furloughed. For such persons, there is no point harboring false hopes if you can eventually be laid off from furlough. After all, you can still be rehired or re-employed even when you are laid off.

On the side of the employer, furlough makes restaffing much easier than going through the nitty-gritty of fresh recruitment. However, not every business can afford the extra benefits employees are entitled to during furlough.

So, is it better for employees to be furloughed or laid off? Well, it depends on the employer and the method they find more convenient. Both methods have their pros and cons, so employers choose what works best for them.

Nonetheless, you can apply for the Canada Emergency Wage Subsidy (CEWS) if you are struggling with your payroll. The program empowers employers by returning 75% of their employee payroll after meeting all their criteria. That way, you can get assured you can cater for your most important workers and avoid layoff of furlough if need be.

However, If you are looking to retroactively rehire and pay furloughed employees, our software solution is here for you. With our HCM, you can effortlessly handle new employee onboarding and also manage your existing workforce.

Whether you're furloughing your staff or laying them off, bear in mind that maintaining your existing staff should be a top priority. Their health and safety is very important, that's why at PUSH, we provide you with operations that will help you maintain a good staff even in the face of the pandemic.

Can I stay in contact with employees who are furloughed or laid off?

Every HR and software solution is different and has different capabilities when it comes to staying in touch with employees who no longer work at your establishment.

Due to the pandemic, many software companies, Push included, have created unique internal communication features that have never before been seen.  Helping you stay connected to past employees, and keep their records organized and all one, incase the opportunity arises again to hire them back at your establishment.

Bottom line

Furlough vs Layoff remains a valid argument among people in the employment circle. While employers may consider extra workers benefits expenses and recruitment difficulties, employees are most concerned with job security and employee benefits.

It is best to analyze both options as an employer and find out which one best suits your needs. What matters is that you are able to achieve your financial goals without many hassles.

furlough vs layoff

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