By the time you read this article, you have probably already been personally affected by the economic ramifications of the coronavirus. Many organizations have already begun rounds of terminations. Others have opted for mandatory furloughs for employees. Still others have opted for some combination of the above, along with other measures, to keep them afloat over the long haul.
Let’s take a look at some key differences between firing and furloughing employees.
When an employer opts to furlough employees, it means their job is temporarily suspended but not gone. Here are the basics:
- A furlough is generally considered temporary and may or may not have a set end date. For example, some organizations have furloughs on a semiregular basis. It is considered a form of temporary leave of absence.
- Furloughs can be short and recurring to trim costs, such as furloughing employees every other Friday or 1 day per month. (Remember, however, that there may be other ramifications for short, recurring furloughs. Employees who qualify as overtime-exempt and are paid on a salaried basis often cannot be subject to a short furlough that is unpaid without essentially nullifying their overtime exemption status. Consult with legal counsel in these cases to ensure these are handled appropriately.)
- Employees do not get paid during the furlough.
- It is generally accepted that a furloughed employee still has a job to return to at some point in the future when the situation improves. (That said, sometimes furloughed employees become permanently let go if the situation warrants after more time has passed.)
- Employers can opt to continue paying for employee benefits during this time, easing the burden for these employees. Employers that don’t want their employees to look for other work during this time (and thus be available again when the employer wants to bring them back) may be especially inclined to take this option to de-incentivize these individuals from finding another job.
Firing an employee, on the other hand, is permanently severing the employment relationship.
- All benefits cease, with the exception of any that are legally required to continue, such as Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage for health insurance benefits.
- Severance of employment is considered permanent. However, it’s possible the employer could opt to rehire the individual at some point in the future if it chooses to do so. Unlike a furlough, however, this is the exception to the norm.
- Severance pay is often considered when an employee is terminated but usually not offered during a furlough period.
In both cases, employees cease to get paychecks from their employer and likely will qualify for unemployment benefits as a result. The exception here is for furlough periods that last less than a week—unemployment benefits may not be available in those cases.
Both decisions are difficult. A furlough may seem more compassionate because employees most likely will have a job to return to. But income is lost in either case, so employees may not share that compassionate feeling for furloughs. Both will have impacts on morale for remaining employees.
Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.