What’s the Difference between a Furlough and a Layoff?March 25, 2020
The coronavirus outbreak has led to many businesses having to rethink their staffing needs. What is the difference between a furlough, layoff and reduction in employment?
The surge of layoffs and furloughs due to the COVID-19 outbreak has left many wondering…what exactly is the difference between furlough, layoff and reduction in employment? We explore below.
What is a furlough?
A furlough is a temporary layoff from work. When someone is furloughed, they are typically required to work fewer hours or to take a certain amount of unpaid time off. There are two typical structures when it comes to furloughs:
- An employer may furlough its nonexempt employees one day per week for the remainder of the year or pay them for only 32 hours instead of their normal 40 hours per week.
- Another option is to require all employees to take a week or two of unpaid leave sometime during the year.
When it comes to furloughing exempt employees, employers must be sure they continue to pay them on a salary basis and do not jeopardize their exempt status under the FLSA (Fair Labor Standards Act).
There are certain scenarios where an employer requires all employees to go on furlough, excluding some who provide essential services.
What is a layoff?
A layoff is a temporary separation from payroll. Employees are laid off when there isn’t enough work for them to perform. When employers lay off, they usually intend to recall the person when work becomes available again. Laid off employees are normally able to collect unemployment benefits while on unpaid layoff.
What is a reduction in force (RIF)?
A RIF is a permanent cut in headcount. The position is eliminated without the intention of replacing it. A layoff is often mistaken for permanent termination, but a RIF is in fact the permanent separation.
During a layoff, employees are separated from employment and would be eligible to continue their benefits through COBRA. Employers could choose to subsidize COBRA benefit payments for impacted employees if financially able.
During a furlough, employers may treat furloughed employees as if they were on a “leave of absence” status and maintain benefits coverages while making employer contributions and requiring employee premium payments, or the employer could utilize COBRA for the furloughed time period.