Furlough

What Is a Furlough?

A furlough is a temporary, unpaid leave of absence from work, usually initiated by the employer due to financial constraints or lack of work. Unlike layoffs, furloughed employees remain on the company’s roster and often keep their benefits, such as health insurance. It’s a cost-saving measure that allows organizations to retain talent while reducing expenses.

Furloughs can be full-time or involve reduced work hours. Though employees aren’t paid during this time, they may be eligible for unemployment benefits. Furloughs are common during economic downturns or crises when companies need to pause operations without permanently cutting staff.

Furlough vs Layoff: What’s the Difference?

• Furlough: Temporary, unpaid leave, employees stay on payroll but don’t work.
• Layoff: Permanent or indefinite job termination, employees are let go.

This difference matters a lot for HR because it affects benefits, legal obligations, and employee morale.

Why Do Companies Use Furloughs?

Imagine your company’s business slows down unexpectedly maybe due to economic downturns, seasonal shifts, or emergencies like a pandemic. What do you do to stay afloat without losing your trained team?

Furloughs offer a flexible solution:

• Cost Savings: Reduce payroll expenses quickly.
• Retain Talent: Keep skilled employees for the future.
• Avoid Layoffs: Prevent permanent job losses.
• Adaptability: Easily bring employees back when business picks up.

During crises like the COVID-19 pandemic, many companies turned to furloughs to survive. It’s a strategic move that protects jobs while balancing finances.

How Does Furlough Work in HR Terms?

Managing furloughs isn’t just about telling employees to stay home. It involves clear communication, legal compliance, and smart planning. Here’s what HR teams should know:

1. Communication Is Key

Employees often feel anxious during furloughs. Clear messaging helps ease uncertainty. HR should explain:

• Why the furlough is happening
• How long it might last
• What employees can expect about benefits and return dates

Transparency builds trust.

2. Legal Considerations

Furloughs are regulated by employment laws that vary by country and sometimes by state. HR must ensure compliance with:

• Wage and hour laws
• Unemployment insurance rules
• Contractual obligations
• Collective bargaining agreements (if applicable)

Mistakes here can lead to costly lawsuits or fines.

3. Payroll and Benefits

Even if employees don’t get paid, some benefits might continue during furlough:

• Health insurance
• Retirement plan contributions
• Paid time off accruals (sometimes paused)

HR and payroll teams need to adjust systems accordingly, so benefits don’t get interrupted unless intended.

4. Document Everything

Keep records of furlough notices, employee acknowledgments, and policy updates. Documentation protects the company in case of disputes.

Legal Aspects of Furlough

Furloughs aren’t just about asking employees to stay home. They involve legal obligations that HR teams must follow carefully.

Employment Contracts and Policies

Check existing employment contracts and company policies. Do they mention furloughs or unpaid leaves? If not, HR may need to update these documents to clarify procedures.

Labor Laws and Compliance

Depending on the country or state, furloughs may be regulated differently. For example:

• Notice Period: Some regions require advance notice before furlough.
• Benefits: Rules about continuing health insurance or retirement benefits vary.
• Unemployment Benefits: Furloughed employees may be eligible to claim unemployment pay.

Communication and Documentation

Clear communication is key. HR should provide written notice specifying furlough duration, expected return dates, and impact on benefits. Documentation helps avoid misunderstandings or legal disputes.

Furlough and Employee Rights

You might be wondering, 'What rights do furloughed employees have?' It varies but generally:

• Employees can apply for unemployment benefits while furloughed.
• They retain their job status and seniority.
• Some protections like health coverage may continue under laws like COBRA (in the U.S.).
• They should be reinstated to the same or equivalent position once furlough ends.

HR must guide employees on their rights and available support during furlough.

How to Implement a Furlough Program: Step-by-Step for HR

If your company is considering furloughs, here’s a simple roadmap for HR professionals:

1. Assess the Need

Evaluate financial forecasts and business conditions. Is a furlough necessary, or are there other cost-saving options?

2. Plan the Furlough Details

Decide which employees or departments will be furloughed, for how long, and whether it’s full or partial furlough.

3. Review Legal Requirements

Consult legal counsel to ensure compliance with labor laws and contractual obligations.

4. Communicate Transparently

Explain the situation honestly to employees. Use emails, meetings, or FAQs to answer questions and reduce anxiety.

5. Document Everything

Provide written furlough notices and keep records of employee acknowledgments.

6. Manage Benefits and Support

Clarify how benefits will be affected and offer resources such as counseling or unemployment application guidance.

7. Monitor and Review

Regularly check the financial health of the company and update employees on when furloughs might end.

How Does Furlough Impact Company Culture?

Furloughs can shake up workplace morale. People feel uncertain, disconnected, or worried about job security. HR’s role includes:

• Keeping furloughed employees engaged with occasional check-ins.
• Supporting remaining staff who might feel overworked or stressed.
• Planning for smooth reintegration once furloughs end.

A positive culture through tough times makes all the difference.

Using HRMS Software to Manage Furloughs

Here’s where technology steps in. Managing furloughs manually is complex and prone to errors. An HRMS like Qandle can help by:

• Automating furlough notices and tracking
• Adjusting payroll and benefits automatically
• Managing leave balances and return dates
• Keeping communication clear and documented
• Providing analytics to forecast workforce needs

With an HRMS, HR teams save time, reduce mistakes, and improve employee experience.

Navigating furloughs requires robust HR management systems. Qandle's comprehensive HRMS software offers tools to manage employee records, track furlough periods, and ensure compliance with legal requirements.

Ready to streamline your HR processes? Schedule a demo with Qandle today and discover how we can support your organization's needs.