Every now and again the average person finds himself having to make a choice between the lesser of two evils. It is part of being human. Thousands of U.S. employers are finding themselves in that position right now. Thanks to what has become known as the COVID-19 pandemic, they are having to choose between layoffs and furloughs.
Your typical man on the street had no need to understand the difference between layoffs and furlough prior to the recent coronavirus events. Yet the differences are very real. They are real enough that employers have a tough decision to make. There is no black and white answer that applies to every situation.
What Layoffs Mean
When companies implement layoffs, they are letting employees go with no guarantee that employment will resume in the future. The ‘arrangement’, if you will, works both ways. Employers do not promise to call employees back; employees do not promise to come back if called. Both are free to pursue other arrangements as necessary.
Some layoffs include severance pay. Others also include extended employee benefits for a limited amount of time. But more often than not, layoffs come with nothing. Employees receive their final paychecks and are sent home for the last time. No more pay; no more benefits.
Having to choose between layoffs and furloughs often leaves companies looking at the bottom line. It goes without saying that layoffs cost employers less. Once severance is complete, all of their costs associated with laid-off employees also cease.
What Furloughs Mean
When companies implement furloughs, they are essentially implementing temporary leaves of absence. Furloughed employees remain employed; their jobs will be waiting for them when the furlough period ends. This kind of arrangement relies on good faith from both parties. The employer intends to bring back workers when the time is right while workers intend to return.
Dallas-based BenefitMall says the biggest difference with furloughs is that employees are generally able to keep their benefits intact. They also have the assurance that their jobs are not being eliminated. When business picks up again, their jobs will be waiting for them.
The furlough option is obviously more costly for employers. Why? Because they are still paying benefits to workers who are not producing any work. Still, implementing a furlough saves money in the long run because employers don’t continue to pay wages during the furlough period.
Unemployment Insurance Complications
Companies reeling from the COVID-19 pandemic are having to look at their own bottom lines in determining what to do with employees. The reality is that many companies just cannot afford to keep their employees around without producing anything. They must choose between layoffs or furloughs.
Complicating that choice, at least under normal circumstances, is the issue of unemployment insurance. Furloughed employees are not necessarily eligible to receive unemployment payments. It is a state-by-state thing.
The good news for furloughed employees in the COVID-19 era is that, separate from unemployment insurance, they are eligible for federal assistance to make up for lost income. It stands to reason that the total amount of assistance they receive will be less in states that do not allow furloughed workers to collect unemployment insurance.
No Easy Answers
There are no easy answers for employers suffering at the hands of COVID-19. Having to choose between layoffs and furloughs is a consummate example of choosing the lesser of two evils. Either choice is going to be unpleasant, but it may not be avoidable.
Here’s hoping that the crisis doesn’t continue too much longer. We all need to get back to work as soon as possible.