Simple Guide to Employee Furlough

Employee furlough schemes are put into place to support workers during times when a business may have financial difficulties. Whether it be a global pandemic or an economic recession, furlough is on standby to offer job protection to those who cannot work. Read on to learn more about how furlough works, how it is different from a layoff, and more. 

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Employee Furlough – What is a Furlough?

Firstly, it’s important to understand exactly what furlough is. In a nutshell, it means “temporary layoff from work”. It is a mandatory suspension from work. Normally furlough is without pay and can be as brief or as long as the employer or government requires. However, workers do keep employment benefits, such as health insurance. Implementing furlough is more typical during a government shutdown when nonessential public employees are given orders not to work. This is also an attempt to avoid mass unemployment. 

It is also possible for private businesses to furlough workers in certain situations. For example, it could be a cost-saving measure when the company lacks the financial resources to pay workers. Furloughed employees usually return to their jobs after a period of time. Ultimately, the goal of employee furlough is for the company to save money by lowering expenses. 

So how does furlough work? Essentially, it comes into practice when company sales do not match the projected revenues. Employers notify their employees of the situation. In some cases, organizations will be able to tell their workforce how long this measure will be in place. Yet, in other cases, they may not know. Following this, employees must not do any work for their company until furlough comes to an end. 

Furloughs vs. Layoffs

Whereas furloughed workers normally return to their jobs after this period, this is not the case when laying off employees. Layoffs are when an employer dismisses a worker permanently. However, this is not due to personal reasons or because the workers weren’t good at their jobs. Typically, it happens when an employer can no longer afford to pay some or all of their workforce due to economic reasons. Let’s take a look at the main differences between the two.

Furlough Employee Unemployment Benefits 

Furloughed workers keep their employee benefits and compensation packages, such as access to health and life insurance during the furlough. Yet, laid-off workers lose all their entitlement to these. 

Return to work 

Employers usually provide furloughed employees with a date or condition for coming back to their duties. In this sense, they have the expectation of returning to work. Laid off workers will have no such expectation as the company permanently severs them from their contracts. 

Working schedule 

Sometimes, furloughed workers continue to work with a reduced working schedule when they return to work. Yet, a layoff, as it is a complete dismissal, means no returning to work, not even with reduced hours.

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Employee Furlough Across the States – Employee Furlough Laws

The US is no stranger to large scale furlough. Since the 1980s, the country has seen a number of high profile cases of mass furlough. As a result, legislation and requirements in the US for this process are up-to-date and functional. There are a few key issues that should be taken into account when considering furlough across the US. 

Employee Rights

Furloughed workers retain their employment rights during this period. Although employees have the right to seek new employment during the furlough, employers may have policies against employment and/or second jobs written into contracts. Additionally, a furloughed worker is able to claim unemployment insurance benefits for their time without pay. Yet, the rules between States differ, so in order to advise your staff correctly, it’s worth looking up the regulations under your State. 

Paid or unpaid time off

Organizations may still permit their employees on furlough to use paid time off under employer policies. In addition, some employee furlough laws may limit employers from changing their policies to prohibit employees from using leave time they earned when furlough restrictions were not in place. Employers must make this clear in writing in their policies surrounding this matter.

Public vs Private Furloughs

Whereas a private company might furlough employees during a short-term or cyclical downturn, public employees usually go on furlough for larger economic reasons. For example, private seasonal businesses may furlough their workforce during low seasons. However, federal employees may have to go on a furlough period if the government fails to fund the agencies which these employees rely on. 

The No Work Rule

It is mandatory that furloughed workers are prohibited from continuing with any work on behalf of their employer. Even answering a work-related call or email would be considered as breaking this rule. If an employee does happen to find that they are working on furlough days, the employer has an obligation to pay them the equivalent of their salary for that day. Above all, this rule is in place to protect employees from working for free and not forcing employers to pay staff during times of economic difficulty. 

Government Employee Furlough

Although furloughed employees have no right to payment, historically Congress has paid all federal workers for their lost time during a government shutdown. Although there has been no law ensuring workers of their pay, leadership across both political parties have indicated that they will pay workers. What’s more, all the federal workers required to continue working during a government shutdown are entitled to their pay in full. 

Government Excepted Employees

During a government shutdown, the majority of workers are prohibited from going to work. Yet, there are two types of federal workers who are exempt. The first group includes employees who receive funding through another body or private organization other than the government. Any self-funded company is exempt and, as such, can stay open during a government shutdown. For example, The United States Post Office is self-funded. Therefore, post offices remain open through a shutdown and employees continue working. 

The second group includes employees which the government calls “excepted”. These are workers who are required to keep working during a furlough. Usually, their jobs are in the fields of health, safety, property protection or some other essential and critical sector.

Furlough FAQs

Handling employee furloughs are never easy, and rarely simple. However, with the right know-how, you’ll be able to manage them with ease.

Will employees who are furloughed get paid?

Congress will determine whether furloughed federal employees receive pay for the furlough period.

May an employee volunteer to do his or her job on a non-pay basis during a shutdown furlough?

 No. Unless otherwise authorized by law, an agency may not accept the voluntary services of an employee.

May employees take other jobs while on furlough?

While on furlough, an individual remains an employee of the Federal Government. Therefore, rules regarding outside employment continue to apply when an individual goes on furlough. As such, employees should speak to their employment agency in order to be sure of the rules and regulations regarding this matter and their employment contract. 

May an excepted employee take previously approved paid time off or receive new requests for paid time off during a shutdown furlough?

No. When an excepted employee is not working or not performing excepted activities he or she cannot be in a pay status. Excepted employees must be either performing excepted activities or furloughed during any absence from work. 

Human Capital Management Software – Key to Managing Furloughs.

Familiarizing yourself with the ins and outs of employee furlough is useful for situations in which government shutdowns occur. This way, you can be up to speed on what to do to avoid laying off your workers and advising them on how to move forward.

Written by Charlotte Stace

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