Furlough - What Is The Meaning Of Furlough And Its Importance | HRMantra Hr Software

Furlough - What Is The Meaning Of Furlough And Its Importance | HRMantra Hr Software

5-6 minutes

Furlough refers to a leave of absence from work wherein the employees maintain their designation but do not receive their salaries for some time. Furloughs can be either term or long-term depending on circumstances.

Let''s Explore:

• Furlough Definition
• How is Furlough Different from Layoff
• How Employees Benefit from Furlough
• How Employers Benefit from Implementing Furloughs
• Disadvantages of Furloughed Employees
• Conclusion
• Frequently Asked Questions

Define Furlough

The term refers to the act of giving employees time off due to extraordinary reasons in an organization. It is a leave of absence. An employee on furlough usually retains his or her position. The actual furlough does not mean that the organization will pay them or shut down.

Distinction between Furlough and Layoff

The reason being that as much as the terms furlough and layoff may seem similar, their provisions and even consequences can be far from each other.

Knowing what a furlough means, it''s important to know what a layoff is. While a furlough is a measure, layoff represents employment termination along with the pay and benefit structure. When you are furloughed, there are chances for your return, which is seldom the case with layoffs.

When an employee goes on a furlough, they are scheduled to return to their duties once the period is over. However, their hours can be long. They are absent. On the other hand, layoff simply implies that there is no more work usually and hence is the end of employment. Layoff in this case, the employee loses his or her ties with the company. Job losses can be permanent and occur due to disturbances and financial problems.

How Employee Benefits from Furlough

The employees can resume their work at the reduced level of productivity at the end of the leave period. The leave period is beneficial to employees as it provides job protection to them.

At the end of the leave period, employees have something to fall back on. Moreover, during their time at work, they can also avail the compensation of unemployment benefits.

How Employers Benefit from Implementing Furloughs

Furloughs benefit businesses in the following ways:

1. Cost-cutting: When the market is down and there is not enough work or money to pay all employees, businesses can cut down on costs by sending some employees home. Moreover, as these employees can be summoned back when required, employers do not need to spend money on recruiting and training personnel.
2. Retention of Skilled Workforce: Since furloughed employees have not been fired off, businesses can call back trained employees any time they want to.

Disadvantages of Furloughed Employees

The disadvantages of being furloughed include:

• Loss of Talent: The performing people around you will more likely get a new job while you are still in business. Whether it''s only two weeks away or not, employees will most probably use this time to revamp their resumes and find jobs. If not, the employer has decided to recruit and train new people to work.
• Loss of Productivity: Upon returning, employees may not be as productive and efficient. The employees that were sent on furlough might take some time to get back into the groove and reach previous levels of productivity. It becomes difficult to get the routine back with the same level of efficiency as before.
• Reduced Morale of the Employee: Fewer staff numbers and working hours can mean worse service for the customer, longer delivery times, and lowered customer satisfaction. If the furlough is unexpected, it may lead to doubts about the future prospects of the company, increasing stress, gossip, and rumors, thus decreasing work productivity.
• Effects on Employee Benefits: The insurer can require that an employee work a certain number of hours to qualify for employer-sponsored health care coverage. Employees who fall below this threshold due to reduced hours may find themselves losing their coverage unexpectedly. It''s always wise to consult with your insurance agent so they may advise and walk you through your plans.

Final Thoughts

Furloughs are a cost-cutting tool during slow business periods. Employers prefer to enforce furloughs rather than layoffs because, while on a furlough, they still have access to their labor pool. If they were to lay off employees, then they would have to recruit and train new employees, which is a costly and time-consuming process.

Frequently Asked Questions

Does paid time off or vacation mean furlough?

No. A furlough is time off without pay or a reduction in hours. It is used by private companies to manage their bottom line while keeping employees on the payroll. The major function of a furlough is reducing the cost of business while keeping employees at work.

Are benefits, such as health insurance, typically continued during a furlough?

Normally, when employees are furloughed they do not receive salary. However, they usually retain employment-related benefits such as health insurance during the period they are not working. If you retain your health insurance coverage, you will need to continue paying your portion of the contribution.

Can employees seek alternative employment during a furlough?

Absolutely! You can find another job if an opportunity comes your way, even if you have been placed on furlough from another position.

How long do furloughs typically last?

The duration of a furlough may be as short as a week or as long as several months, depending on the company. Leaves of absence for employees are intended to be measures that will allow for the survival of the company.

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