Difference Between Furlough and Layoff

If you’ve tuned into the news lately, chances are you’re well aware of how COVID-19 is wreaking havoc on the economy. Many companies were also blindsided by the sudden mandated closures of their establishments and had little time to prepare. Even for those businesses that were deemed essentials, the demand has been diminished due to social distancing guidelines. 

Consequently, millions of employees were furloughed or laid off by employers as a last-ditch effort to keep the doors open or stay afloat until they can reopen. Maybe you’re wondering how they differ? Do furloughed workers have privileges that laid off-employees don’t? Or perhaps you want to know how a future furlough or layoff can impact you. 

We have all the answers to your pressing questions and more in this guide. 

Furloughs and Layoffs, Explained

Whether a company decides to furlough or lay off employees, both are a major cause for concern. However, there are key differences between the two that you should know. 

Furloughs 

Furloughed workers are dismissed from their roles for a temporary period. During this time, you are prohibited from completing any work-related activities and can be expected to lose access to your work emails, databases or programs. 

Many furloughed workers continue to receive healthcare benefits without pay and are expected to return to work when operations resume. Keep in mind that your employer may request compensation for any payments made on your behalf for group coverage during the furlough. 

Your employer may allow you to exhaust paid time off if you want to be compensated during the furlough. However, this may not be an option if they are financially strapped.  

Also, know that the rules vary for salaried and hourly workers who are furloughed. When dealing with hourly workers, employers have the option to scale back hours to save money. So, you will only be compensated for the time spent on the job. 

If you are salaried, the employer must roll out the furlough in weekly chunks due to your pay structure. Even if they cut back your hours and only require you to come in 2 days per week, the Fair Labor Standards Act mandates that you must be compensated for the entire week. Also, you may not qualify for healthcare coverage due to your reduced workload. 

Layoffs

If you are laid off, your employment with the company is terminated for no fault of your own. Layoffs can be temporary solutions for companies. You may be asked to return to work at a later date when things smooth over. Unfortunately, many layoff are permanent. 

Some employers offer a severance package to help hold you over until you find work elsewhere. You may also be permitted to cash out any accumulated paid time off or vacation hours. 

What about healthcare coverage? In the past, you would incur steep costs for the Continuation of Health Coverage (COBRA) through the group plan offered by your employer. However, you can now take advantage of the special enrollment period provided by the Healthcare Marketplace for those impacted by COVID-19 and purchase a plan with lower premiums. 

Will You Be Eligible for Unemployment? 

Whether you are laid-off or furloughed by your company, you will be eligible for unemployment compensation in your state. The Coronavirus Aid, Relief, and Economic Security (CARES) Act also makes you eligible for an additional $600 in compensation each week through the end of July. 

What happens when the benefits end? Are you on your own? Not necessarily, the federal government will pay an additional 13 weeks of unemployment benefits. 

It’s essential to check with your state for additional guidance on receiving unemployment benefits. Some require weekly work searches for laid-off employees since they more than likely won’t be returning to their role. When inquiring, you may find that this requirement is not mandatory during this time. 

Quick note: Prior to the COVID-19 crisis, furloughed employees received unemployment benefits at the discretion of the state. The CARES Act has relaxed this requirement and allowed individuals who were furloughed due to COVID-19 to access the same benefits as laid-off workers. Please note that these rules may change in the future once the crisis has passed. 

A Final Thought 

A furlough or layoff is a tough situation for many to endure. It places a strain on your finances and can leave you in the dark about your future. But you’re not alone. 

To make life a little easier, apply for unemployment benefits through your state if you haven’t already done so. If you don’t know where to start, check out this detailed guide. Also, tap into any other resources in your state or community that may be available to you.