The layoff tidal wave is growing.  The downsizing of Q4 continues into the new year as companies slash staff.  This is the last thing employers and employees want to see happen. It means financial uncertainty for all parties involved. The reality is that sometimes these measures must be taken.  Let’s define the differences, the pros, and cons.

Furloughs are periods where employees are not working nor getting paid. Whereas furloughs are temporary arrangements, layoffs are permanent.  Laying off employees might seem like an enticing option to an employer who needs to save money, but it may not be the right decision in every situation.

• Laying off most or all of the workforce would necessitate recruiting, hiring and training a similar number of people once the ordeal is over. This can be extremely costly and time-consuming.
• Employers may still be obliged to provide benefits to their workers during a furlough. This can be too much of a burden in itself and force an organization into a mass layoff anyway.
• Furloughing some employees enables employers to keep a “rotating” schedule, where everyone has reduced hours instead of only a few having full hours.
• Layoffs immediately free up lots of money, in terms of benefits and salary payments.
• A furlough or layoff may trigger bargaining obligations, depending on the business.
• Furloughs enable employers to resume operations quickly after the situation changes.
• Furloughed employees may, in certain instances, still be able to use paid time off, reducing cost savings for employers.
• Furloughed employees may resent the business if they don’t receive any compensation (e.g., paid time off, health benefits or reduced hours) during this period. Disgruntled workers may not be eager to be productive when they return.
• Furloughed employees are generally still eligible for protected leave under the Family and Medical Leave Act. Laid-off employees are not.
• Furloughed employees may be entitled to health benefits under some provisions of the Affordable Care Act.

When employers need to forge ahead with a decision to reduce their workforce, the situation must be handled with professionalism and respect.

• Develop a Plan
• Communicate Honestly and with the Same Message to all
• Keep in Touch with Furloughed Employees
• Consult with Legal Counsel
• Title VII of the Civil Rights Act
• The WARN Act
• FLSA

Deciding whether to lay off or furlough employees is not an easy task. Employers must weigh the welfare of their employees against the financial realities of running a business. In these situations, transparency is key for a smooth transition.

ASE Connect

Peer to Peer Discussion: Layoffs, Furloughs, and Terminations – What’s the Difference?
February 28, 2023
9:00 a.m. – 10:00 a.m.
Downsizing your company is never easy, especially in times of financial hardship.  In some instances, it may be the best (or only) option.  Join ASE Members to discuss: the difference between Layoffs, Furloughs, and Terminations and how to determine the best staff-reduction solution for your organization. 

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