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Layoffs Vs Furloughs: What to Consider

29 August
by Josh Hrala
6 minute read

Reduction events can take many forms with the most widely used being a permanent RIF (reduction in force), but there are more temporary approaches, too, such as layoffs or furloughs.

But when it comes to choosing which will work best for your organization, you need to understand the basics and how each event will impact not only your bottom line (because that’s not too difficult to calculate), but how it will impact your ability to recall workers and what events like these can do to your employer brand, which is why we’ve decided to dig into a common question: layoffs vs furloughs, which to choose?

Before we jump in, though, it’s important that - no matter what event you go with - you work closely with your legal team during any RIF event to ensure you are following all local, state, and federal laws. We are not lawyers!

Let’s dive in.

The Difference Between a Layoff and a Furlough

Despite how we use them term in everyday conversation, a layoff is meant to be a temporary reduction in force. That means that, once finances have settled down or new work in available, those let go during a layoff will have the chance to be ‘recalled.’

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In other words, a layoff is very much like a RIF (which is always permanent) in that people end up leaving your organization and may well wind up working elsewhere because there is no guarantee that they will be recalled.

When it comes to furloughs, employees are given leave from work (typically unpaid leave) for a specific amount of time. This can be caused by a business need, such as to save costs, re-balance a budget, etc, or because the work is seasonal.

Think of an ice cream shop. Workers there may work during the summer months but go on a furlough over the winter because not many people are buying ice cream, meaning that it makes the most business sense to close during the off season.

layoffs vs furloughs

Employees are not terminated during a furlough. Sure, they can find new work elsewhere during the event, but they know they will have a job - if they want it - when business resumes normal operation.

In summary, a layoff is meant to be a temporary reduction event where employees are let go from the company and are not guaranteed that they will get recalled. After a certain period of time, the layoff becomes permanent and those let go will need to find work elsewhere.

For a furlough, employees still have their jobs but are on unpaid leave, meaning that - when the business resumes operation at full strength - those who took the furlough are welcomed back.

Another key difference is how benefits may work.

Those who are laid off may be able to receive unemployment compensation and sometimes may continue to receive other benefits like healthcare (usually to help keep folks on the recall list). Permanent events also typically include severance packages and outplacement services. These things are typically not offered during a furlough because they aren’t long enough and the employees impacted are not actually 'let go,' but always make sure to consult your legal team to make sure your furlough is being handled properly.

You can read all about the different types of reductions here.

Layoffs Vs Furloughs: What to Choose

Like all events of this nature, you need to look at how your business typically operates before making a decision.

You need to keep in mind that any sudden reduction event (even temporary ones) aren’t viewed well by staffers or the public. We say sudden because, like in the sample above, it makes sense for some businesses to be closed when there isn’t any business to be done, like landscaping, seasonal attractions, and others.

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A sudden furlough, where staff members have to go without a paycheck for a specific amount of time, will stress out your workforce and may force some to jump ship to find new work outside of the company. A temporary layoff is the same. Both of these events can make your workers feel unstable and, therefore, leave permanently.

But what should you consider when it comes to choosing between events?

There is no golden rule of thumb that works out for everyone. A layoff may work out the best if you aren’t sure if you’ll be able to recall all employees. Providing them outplacement support even if the move is temporary can also calm the waters.

On the other hand, a furlough, where employees know they will have work in a few weeks or days, might be more enticing, keeping your workers around. Again, it comes down to your budget, how your business operates, and the legalities you need to consider.

This is where some serious analysis can come into play. Consider how your customers will view your move, how your staffers will feel about it, and how you plan on moving forward after the fact.

Consider the Customization Offered by Both

One of the benefits of using a furlough over a layoff is that you can have a rolling program that doesn’t have people without work for long periods of time.

What does that mean?

In short, you could have a furlough that happens every Monday for a set amount of months, saving your business money every week without having staff members completely out of work. You could also have furloughs for two days, three days, or even a longer period of time. Whatever works for you and your business.

A layoff, on the other hand, is more applicable to events that need to be in a lump of days. For example, in your rehire policy you can say that employees will stay on the recall list for two months. After that time, the layoff is permanent.

layoffs vs furloughs

Again, both of these moves can push people to leave your organization, but there are times when each can be right choice over the other.

Impact on Employer Brand

With any reduction event, your brand might take a hit in the public eye, opening up the possibility that you may lose customers or revenue.

Despite those concerns, reduction events are often the last stand to get a business back on track because - let’s face it - no one inside or outside an organization likes when a layoff happens.

Layoffs and RIFs can signal that your business is floundering even if the move was simply to reduce redundancies or even to pivot to new product or service. This is why it’s vital to include proper offboarding practices when a layoff occurs.

We highly suggest using an outplacement provider to help your exiting staff members land on their feet in a new role. You can learn all about outplacement here.

As for furloughs, they can signal the same thing - that your business is struggling - but they more often than not signal that layoffs are coming in the future, making them more impactful internally where employees might read the writing on wall (even if there is no real ‘writing on the wall’ at all).

For both of these options to work out in the long run, always be as open and transparent as possible. Make sure you monitor how your employer brand is doing with online tools that can help pinpoint how the public is taking the event. We also suggest using anonymous surveys to test how your move is perceived internally, too.

Layoffs Vs Furloughs: The Takeaways

Both layoffs and furloughs are meant - on paper - to be temporary events. However, layoffs often turn permanent, at least for a good portion of those let go.

Furloughs can offer a bit more flexibility than layoffs, though layoffs are better for longer term reductions.

At the end of the day, you have to consider what will work for your business, and what will align well with the culture you have created or manage.

And finally, always double and triple check with your legal team to make sure whatever you choose is enforceable and complies with all local, state, and federal laws, especially when letting go workers over the age of 40 or holding a mass layoff event because these situations require extra steps to ensure compliance.

Want to learn more about furloughs and layoffs? Download our guides here:

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