With millions of jobs impacted by the coronavirus pandemic, a number of companies are using furloughs and layoffs as a way to cut costs. While being laid off means that your employment has been terminated, a furlough is different. Here’s what it means to be furloughed.
WHAT’S THE DIFFERENCE BETWEEN LAYOFFS AND FURLOUGHS?
“A furlough is an unfamiliar concept for most employees and their families,” says Misty Guinn, director of benefits and wellness at Benefitfocus. “The simple answer is it's a mandatory, temporary, unpaid leave; layoffs mean a full separation from the company, or termination.”
If being furloughed seems preferable to being laid off, in many ways it is. According to Guinn, it's common for employers to use furloughs as a way to reduce labor costs without the added expenses of severance packages, making it easier for to recover and bring their employees back to work. There’s also a chance you get to keep your benefits if you’re furloughed.
However, there are downsides to furloughs because they create uncertainty for impacted employees regarding pay and benefits. And because there isn’t an established time frame for how long a furlough can last, it can be emotionally draining not knowing when, or if, you’ll return to work.
Generally speaking, the maximum length of a furlough is 52 weeks, says Matt Erhard, a managing partner at recruiting firm Summit Search Group. However, “the allowable length of a furlough varies depending on where you live, what industry you work in, and the type of work you do, so it’s difficult to give an exact answer.” In non-COVID-19 circumstances, furloughed employees are sometimes told how long the period will last in advance (note this is more common with seasonal employees). But in unforeseen situations such as this one, an indefinite furlough is a possibility.
WHAT HAPPENS TO YOUR BENEFITS?
When it comes to benefits coverage while furloughed, there is no one-size-fits-all answer. “With furloughs, it’s case by case, but there are a few general rules applicable to every situation,” Guinn says. For example, if an employee is set to lose their benefits, they must be notified and COBRA coverage must be offered.
To determine if and how your benefits will be impacted, your best bet is to dig into your specific plan documents. “Employees need to look at their plan terms — sometimes plans can continue on a short-term leave of absence,” Guinn says. Additionally, a furlough is a qualified life event and could mean employees are able join their spouse’s plan.” Some employers may offer unique short-term benefits, such as a voluntary loan where employees receive a better interest rate than with a payday loan or a high-interest credit card loan, Guinn adds.
CAN YOU FILE FOR UNEMPLOYMENT?
Whether you’re laid off or furloughed, you can file for unemployment. “In order to receive the maximum amount of unemployment benefits, it is advisable to file on the first day an employee is furloughed,” Guinn says. “Typically, after filing for unemployment benefits, there is a one-week waiting period before the aid kicks in. However, several states are waiving those delays, and even if there are delays, the benefits are paid retroactively.” In other words, even if your state requires additional time to process your claim due to a surge in unemployment filings, your check should cover every day you were furloughed, even if it takes a few weeks to arrive.
As for how long you can receive unemployment, “under the CARES Act, you can receive unemployment compensation based on your most recent earnings for up to 39 weeks, regardless of whether you’re furloughed or laid off,” Erhard says.
CAN YOU QUIT?
Quitting your job while furloughed is certainly an option, but don’t count on receiving assistance if you do. While it’s at the discretion of the company, know that severance is often not offered to those who leave their job willingly. Plus, when you voluntarily leave your job you typically cannot get state unemployment compensation, Erhard says.
If you quit, you will also lose whatever remaining benefits you were receiving. “I’d generally advise against quitting during a furlough unless you’ve already found alternate employment,” Erhard says. “In many cases you can continue to receive partial unemployment even if you take on a part-time job during a furlough, so that may be a better option.”